Engagement & Growth

Overview

The new era of technological innovation and globalization has created a constantly changing business environment. The ability to manage and adapt through sustainable thinking is integral to success. This involves transitioning individuals and teams within an organization towards a future, more sustainable desired state.

Change management concepts, tools, and skills support implementing an effective sustainability program. A structured, change management approach to building a sustainability program ensures a smoother and more successful implementation process that can result in lasting benefits for the organization.

Organizations that adapt quickly may create a competitive advantage for themselves, while companies resistant to change can get left behind. A sustainability program should provide the framework and tools to manage and adapt to the rapidly changing systems within which a business operates.

Nonetheless, it takes time to build a team and get program support. The most effective approach to building a successful sustainability program is to start with a mix of planning and action. Even a small group can gain traction with quick win projects and a solid business case for sustainability. Having a great team and broad support is crucial to program success and being able to integrate sustainability across your organization. That is why engagement strategies and activities permeate program development.

Sustainability initiatives often start out with very limited budgets. That makes getting support critically dependent on early successes and careful planning. At the outset, many program managers identify a few projects that will be well received and shine a positive light on sustainability efforts. These projects are typically relatively low cost and easy to implement. They help a program gain initial momentum and build pockets of support.

While working on a few quick win projects, you can simultaneously build a business case for sustainability. The focus of the business case should be on how sustainability can create value for the organization. Having a presentation that highlights risks as well as opportunities specific to your organization is at the heart of both early and ongoing engagement. It will generate the interest and support needed to move forward with developing and implementing a strategy for a sustainability program.

Build broad support

How will you convince the key decision-makers in your company that it is worthwhile for them to talk about, help plan for, and allocate the resources needed to create and implement a plan for sustainability? Do you just need the CEO to take a strong leadership role from the start? Or is broader senior management involvement the key to success? Whom do you need on the sustainability team and how do you get them involved?

Sustainability work takes commitment – at a variety of levels and from all business functions and units. Getting buy-in and building support is often a gradual and personalized process that requires a variety of skills. Listening to different perspectives and understanding motivation is a big part of finding pathways to getting people on board. At the heart of success for business sustainability is remembering that it’s a business. You must be able to make business sense out of all your sustainability ideas. Speaking the language of business is an essential skill for those who need to persuade others to advance sustainability practices and projects. You might not even use the word sustainability!

Building broad support is a critical component of the planning and management process. You will need to:

• build an effective, cross-functional sustainability team,
• explain to people how sustainability can support them in their business roles,
• motivate people to engage in sustainability planning and activities,
• communicate often and keep channels of communications open and two-way.

Building broad support involves meeting people where they are, using their terminology, and appealing to their interests. It is a good way to figure out what will or won’t fly before you get too far along. This can save you a lot of headaches and disappointments!

Connect to stakeholders

Businesses do not exist in a vacuum. They all have stakeholders.

Today, employees, customers, investors, and other stakeholders have greater access to information than ever before. This poses both a challenge and an opportunity for businesses.

Understanding your key stakeholders’ interests, values, needs, goals, and concerns can help you figure out what sustainability issues matter most to them and how you can get them on board with sustainability work that is important to creating and protecting business value. Creating effective and clear communication of company impacts and activities is essential, too. Two-way communications on key issues in advance of decision-making enables consideration of stakeholder perspectives. These feedback loops provide the opportunity to benefit from the intelligence of key stakeholders and course correct as warranted.

Communicating with internal and external stakeholders can provide valuable business information for making decisions about products, services, and other business activities. It provides market intelligence. Common understanding and better decision-making emerge and lead to more positive long-term results.

As a sustainability program matures, knowing who your stakeholders are helps determine communication strategies and reporting audiences. It is a good business practice that helps your organization better manage risks and leverage opportunities. Stakeholder engagement is important for aligning and guiding business decisions. It is at the heart of identifying what’s important to work on, conducting a materiality assessment, and setting sustainability goals.

Stakeholder identification

Before developing a stakeholder engagement strategy, you need to identify your stakeholders and what they care about. Stakeholder identification and mapping is an important practice for understanding the range of stakeholders and how they relate to key sustainability issues.

The image below offers a high-level stakeholder map representing the range of a company’s stakeholders.

Engagement and communications

Stakeholder engagement is a practice used by organizations to understand stakeholder perspectives. Companies are better able to solve complex issues of concern to the business when they understand and consider these broader perspectives. They can mitigate risks associated with major decisions by gathering and evaluating a variety of viewpoints in advance of decision-making.

Stakeholder communications should be tailored to reflect each stakeholder’s relationship to the organization, and to elicit a stakeholder’s needs and expectations. The key to maintaining robust stakeholder engagement strategy is through clear, open communication and a willingness to consider stakeholder concerns on all relevant issues. At a minimum, stakeholders should feel that they’ve been heard and that the organization values their input even if their views are not acted upon.

Connected, authentic, and purposeful communications can lead to meaningful dialogue between your company and its stakeholders. This goes beyond one-way disbursement of information or simply telling people what you’re doing. It can include direct stakeholder involvement in the change process.

Assess capacity & pace

Assessing capacity involves looking at what sustainability work needs to get done and determining whether your company is ready and able to do it. This happens at the highest level of strategic planning for sustainability, and also at the project level.

It is about understanding stakeholder perspectives, attitudes, and receptivity on sustainability issues – particularly internal stakeholders – before developing and implementing projects and programs. To do this, you will have to think about the capabilities, knowledge, and resources within your organization.

Here are some questions to consider:

• What is your company’s tolerance for integrating sustainability into business culture?
• Do you have enough staff and strong leadership to accomplish your goals?
• Do you have or can you get the funding and approvals you need?
• Can you cultivate and strengthen internal support for your program?
• Will initiatives resonate with a majority of your employees?

The answers to these questions provide insight into the readiness of an organization to embark on the journey to sustainable thinking and engage with internal and external stakeholders. Where readiness is lacking, take a step back and a closer look at organizational culture.

Many companies need extensive education about the value of sustainability as a management practice. Without this, the company won’t be receptive to the types of commitments that are core to a strategic approach. The Sustrana process will help you identify and navigate barriers that reflect where your organization is in its sustainability journey.

For many companies, this means first engaging with internal stakeholders as a means of gaining information about the external stakeholders with whom they interact. This approach enables the sustainability team to begin the educational process by building sustainability knowledge among internal stakeholders and utilizing their connections with external stakeholders to gain information about broader sustainability perspectives.

Being realistic about the purpose and feasibility of accomplishing what you want to do is important. It helps ensure success, build credibility, and get buy-in. As you build support and increase sustainability activities, you will be weaving sustainability into the fabric of your organization.

Pacing for culture

Pacing for culture is about understanding the pace at which your organization is ready and willing to change. For example, if your company is in the midst of developing new products, now may not be the best time to launch a major sustainability initiative. But you may be able to add value to the process of developing those new products.

Achieving a culture of sustainability can be a long and challenging, but rewarding process. According to sustainable business expert Bob Willard, an organization’s sustainability journey moves along a 5-stage continuum as shown below.

In Stage 1, pre-compliance companies are not up to speed on federal or state legal requirements or accepted industry standards. In other words, they are breaking or skirting the law or operating below par, and trying to avoid getting caught. Companies in Stages 1 and 2 are operating with unsustainable business models. It is only when a company reaches Stage 3 that the capacity for sustainability planning and management begins to emerge.

As a company progresses further along the continuum, its capacity for doing sustainability work increases. In the last two phases the company has adopted a sustainable business framework. It has committed to the principles and values of sustainability and is working to instill them into its culture and employees. The company realizes the value and benefits of applying viable concepts proactively in the business planning process.

Thinking about where your company is on this continuum can help you set expectations. It will inform your approach to education and project selection. Being aware of the journey as a maturing process helps you design and pace your sustainability program to match your organizational culture as it changes and shifts.

The business case

The value of building a business case for sustainability

Getting support from senior leadership for your sustainability program requires a well thought-out and pertinent business case. Many business people start out viewing sustainability work as a cost, without the benefit, or as a “nice to have” and not a “need to have.” A business case helps leaders in your organization understand the value of sustainability. Doing so could arguably be the most important thing you can do to embed sustainable thinking within your organization.

Organizations that do not think through and document a business case for sustainability work struggle to get beyond doing quick win projects. The business case is essential for gaining both management and broader stakeholder buy in and engagement. It is most effective when tailored to the audience and expanded beyond obvious quick-win cost reductions to demonstrate why and how sustainability work will improve risk management and identify opportunities to grow revenue.

The more effective your business case, the easier your efforts to get buy-in and traction will be, particularly as a sustainability program matures. The most effective business case for sustainability is tied to supporting the organization’s strategic goals, which are the focus of senior management. Garnering management-level support early on lays the groundwork for getting buy-in and approvals for your overarching sustainability strategy and program needs. It also supports building a sustainability team and facilitating conversations with stakeholders about the direction your strategy should take.

Your business case must create a clear understanding of what’s driving sustainability in the marketplace and how that creates risks and opportunities for your company.

Benchmarking as part of the business case

Creating a benchmark is an important element of building a business case for doing sustainability work. Benchmarking a company’s activities and level of commitment to sustainability against key stakeholders or against others in the same industry can create a highly motivational picture. It allows you, and other key leaders in your organization, to see how the company stacks up. Being ahead of the curve helps gain an advantage over competitors and ensure long-term profitability. As pressures from sustainability-related macro drivers and business drivers increase, falling behind could pose serious risks for an organization. If you are behind, a benchmarking analysis will bolster the case for getting to work so your business can keep up.

But how do you get this information? Many large company sustainability programs are rated and ranked by organizations like CDP, Newsweek, and Corporate Knights, but they focus on different aspects of sustainability. Beyond what is public, additional information is expensive to acquire. Plus, the vast majority of small and mid-sized companies are not publicly rated at all.

Sustainability benchmarking tools are available, both for free and as a paid service. However you acquire or develop benchmarking information, build it into the business case as a key driver for addressing sustainability.

When buy-in isn’t commitment

Approval for quick wins does not always indicate a commitment to sustainability. Most businesses need a strong business case to move from tactical sustainability to strategic sustainability. Consider:

• Is there management level support to move forward with planning a strategy for sustainability work?
• Is that commitment strong enough to maintain support through challenges?
• Have the necessary resources – in time and money – been allocated to do the data gathering, issue analysis, and strategic planning that underlies a solid sustainability program?

Employee engagement

Top-down management commitment to sustainability, expressed early and often, is a critical driver for success. But a top-down strategy without employee engagement will fail to reap the fullest potential. Employees are the gears that run your company, and they are at eye-level with the impacts you strive to reduce. They must be fully engaged to achieve continual improvement and innovation.

Strong employee engagement can be the difference between success and failure of almost any organizational initiative; it is essential to reaping the benefits of sustainability efforts. That’s because engaged employees make more positive contributions to your organization. There are a multitude of decisions and daily activities that undertaken by employees that impact sustainability factors – everything from turning off lights when they leave a room to realizing how a manufacturing process could use less material or produce less waste. So employee engagement is particularly important for the success of a sustainability program.

Traditionally, companies have measured and monitored employee engagement from a human resource and productivity perspective. In recent years, a win-win relationship has developed between employee engagement efforts and sustainability initiatives.

With the right education and training, employees learn to view daily operations through a sustainability lens, transfer valuable knowledge, and identify potential opportunities for improvement. Companies now see that employee engagement programs can drive success for sustainability initiatives and vice versa. Sustainability provides an opportunity for employees to lead and innovate. Companies can leverage sustainability work to create a collaborative culture through meaningful, purpose-driven work.

Most people feel better about going to work for a company that commits to having a positive impact on people and the environment. But that is not going to last if there is no ability to make good on those commitments. And there is a big difference between well-intentioned, one-off projects and a strategic program to engage employees in sustainability. Fragmented activities and ad hoc efforts can lead to little – if any – impact. In the worst cases this approach may hurt your sustainability program by failing to maintain enthusiasm.

Meet them where they are

When cultivating buy-in, it is best to have a solid grasp on an employee’s current understanding and perspectives of sustainability. Initially, ask ten employees what sustainability is, you will likely get ten different answers. Learning employees’ current mindset about sustainability can be a useful and enlightening first step in developing a program to educate and garner buy in.

A variety of methods such as surveys, interviews, or focus groups can be used to find out how employees describe the company, what influences how they feel about the company, and to gage their current knowledge and perspectives on sustainability and its role in the company. From that baseline, work to increase awareness and understanding about sustainability overall and then build on that by incorporating the company’s specific sustainability vision and strategy. The information gleaned from this internal research can also help you tailor your message so that it will resonate most with the target audience. Ambassadors and others on the sustainability team can also use the results of this information as guidelines on how best to engage with other employees on sustainability.

What does an effective employee engagement strategy look like?

Common sustainability strategies for employee engagement are sustainability pledges, competitions, rewards and recognition, and Earth Day events. These strategies are great, but do they go far enough to advance sustainability?

A more strategic approach uses employee activities to build capacity for sustainable thinking. The goal is for employees to understand sustainability concepts so they can innovate and use sustainability to improve your business. To gain the most benefit, think about how to embed sustainability into company culture and make it part of your general business strategy.

Institutionalizing sustainability has transformative potential for your organization. Strategic sustainability inspires, invites, empowers, and enables positive change at all levels of the organization. Throughout the process, go beyond an activities-based approach. The more employees understand, the more they will be able to connect your sustainability strategy to their daily activities. They will take initiative, be creative, and help you work toward continual improvement.

Professional development opportunities

Besides cost savings and reputational benefits, sustainability work can also enhance employee professional development. It provides opportunities for managers to take on new leadership roles. It can function as a training ground for developing many important business skills and help a company discover the full capabilities of its employees.

Putting sustainability into practice means active coordination, collaboration, and communication across the entire company. Create new contexts for creative participation and move towards more dynamic engagement strategies. This will put your company and employees on a path to perform better in the long run.

Spreading the word

Employees are also a channel for internal and external marketing. Through word of mouth and social media, they often project their feelings about their experiences to colleagues and the public. When employees have a sustainability mindset, they are more likely to understand the goals and rationale behind the sustainability program and generate new ideas for innovation within the company. When employees feel like they’re a part of the program, they will be more likely to communication about it.

Use Ambassadors to engage the broader workforce and communicate back to the Sustainability Committee. They are the best go-betweens and spokespeople for this.

Build a team

Engaged employees are central to a well-developed, highly effective sustainability team. These teams have four basic components:

• A core planning group, Sustainability Committee, is at the heart of a sustainability team. This group works with management to create and then implement a strategy that aligns with business objectives. It is also responsible for sustainability reporting and communications.
• A management level Advisory Board or Champion often provides guidance and support to help the Sustainability Committee understand management roles and assess management’s need for sustainability education and information.
• The Knowledge Base is a group of internal or external stakeholders – like business unit employees or consultants – with information relevant to evaluating and planning work on sustainability issues and projects. They often engage in day-to-day project management as a key resource for project implementation.
• Ambassadors help communicate and build a culture around sustainability. These team members are the boots on the ground in business units and functions around the company. They help with and gain experience in hands on, day-to-day project management. They build critical company-wide relationships and support for sustainability work, providing important two-way communications between the Sustainability Committee and the rest of the company to gauge project and overall program success.

When getting a sustainability program off the ground, seizing opportunities, gaining approval, and getting traction are crucial building blocks. Sometimes there just isn’t enough buy-in to formalize a sustainability team the way it’s been described here. That’s okay. Even without strong initial support, engaging motivated, interested employees to act at the initial stage of a program is a great way to increase chances for success.

The sustainability team composition typically changes over time. Many organizations start with a group of individuals – sometimes referred to as a green team. As the program matures, those individuals will function either as Sustainability Committee members or continue as Ambassadors.

The Sustainability Committee cannot go at it alone when developing a strategy and implementing projects. The success of a sustainability program also depends on the strength and commitment of the Advisory Board/Champion, the Knowledge Base, and the Ambassadors.

The best sustainability strategies have widespread support. They make sense to the company’s management and workforce, and engage lots of people within the company in these various roles. This is the key reason that a sustainability team must draw from many different people within the organization for a variety of purposes if a sustainability strategy is to succeed.

Improve & document (SMS)

Sustainability management is an ongoing activity that involves regular assessment, analysis, and change management techniques. It is impossible to “do it all” the first go around. Sustainability programs mature over time, even if at different rates of growth.

The typical evolution, depicted below, involves learning along the way how to be more strategic to create value for a business. Progress requires building and using sustainability knowledge and management skills. These skills must be developed, nurtured, and strengthened over time at all levels and across all functions to embed sustainability in an organization as a way of thinking strategically.

Change management will help build a culture of sustainable thinking that evolves over time. It will also help the organization efficiently assess, adapt to, and address business conditions and objectives as they shift and change. Being transparent and pragmatic about challenges, lessons learned, and course corrections will build credibility and guide future teams on how to improve their chances of success going forward.

Embedding with an SMS

For many companies, sustainability has become a way of doing business. They have been able to successfully harness and leverage the power of sustainability to drive better performance and innovation year after year. One thing these companies have in common is a Sustainability Management System or SMS.

A Sustainability Management System (SMS) documents the process for managing sustainability within the organization. An SMS is an iterative process. There should be an annual review of what has been accomplished and learned. Check to see if the documented process has been followed, and if not, why. From there, changes can be made to the SMS, as needed. An SMS is a key tool to establish a solid foundation and build a strong sustainability program. Communicating about the SMS to stakeholders builds confidence that the organization is systematically and effectively handling sustainability risks and opportunities.

Organizations with a well-documented SMS have an easier time repeating successes and learning from mistakes. They have an established process that enables them to focus on what to do next and get to work faster.

The Sustrana Process is an example of an SMS and provides the high level guidance needed to work on sustainability. As you follow the Sustrana process and adapt it to suit your organization, your own SMS will emerge. With Sustrana, a basic management system guides getting a sustainability program started: Stakeholder Engagement, Assess, Plan, Implement, Report, and Improve. But each organization’s sustainability management process will be unique to its culture and circumstances. An organization’s SMS is a customized “how to” guide that reflects how sustainability gets done within the organization. It gives both experienced participants and newcomers a framework for understanding, verifying, improving, and growing the sustainability program.

Resources

• Redefining Sustainable Business: Management for a Rapidly Changing World

Lessons learned

People often think of learning lessons as reflecting on everything that went wrong. A more positive approach is to look back and reflect on what went wrong as well as what went right. Many times a comprehensive examination reveals valuable information. Both experiences can illuminate a better way of doing things next time.

Even when things don’t go exactly according to plan, failure can lead to great success when mistakes are viewed through a learning lens. Reflecting objectively on the process and what happened helps you discover new opportunities for continual improvement.

Leveraging lessons learned requires:

• Recognizing accomplishments and mistakes
• Analyzing what worked, what didn’t, and why
• Documenting and sharing findings with key stakeholders

Documenting and integrating lessons learned along the way will provide a fuller understanding of past efforts and guide your team on how to improve sustainability programming in the future. This is a vital element of good sustainability management. When this institutional knowledge is preserved and shared, it becomes easier to work collaboratively towards solutions.

What is the best way to learn what worked and what didn’t?

Sustainability work is not something that happens overnight – it is a learning journey. Every year, take time to review the year’s work and process. Find out if team members followed the expected process, and if not, why not. This helps to get to the root cause of what worked and what didn’t.

By collecting stories about the work from team members, you can:

• Review and confirm the accuracy and relevance of the process
• Identify when and why deviations occurred
• Make adjustments accordingly

Memorialize these steps in a company SMS and integrate the findings and corrective actions you take into the annual sustainability committee report.

The path forward

Ending one cycle and looking ahead to the next stage of sustainability management is like the pause between an exhale and the next inhale. It’s the gap time between wrapping up and starting again. Lessons learned are still fresh in your mind and ideas for the future are emerging and taking shape.

Each year, the sustainability team will also need to adapt to changing business conditions and priorities. The team will morph and change over time, reflecting changes in resources and program objectives. It is important to step back and assess team strengths and weaknesses in the context of overall program growth. This allows time to consider improvements without the pressures of day-to-day project work.

Before leaping into the planning and doing process again, take a moment to envision what you want to achieve during the next cycle of sustainability work.

Assessing change

Most organizations refine the scope and approach to planning and managing sustainability work over time. This results from building on successes, changes in goals, and growth in the organization’s ability to do sustainability work. The initial discussions when moving into a new planning phase will reflect these changing circumstances.

• Where did we succeed and how might we expand on or use those wins?
• What new goals and challenges are managers facing and how might sustainability support or remove barriers?
• Who are the stand-out people who showed support for your sustainability efforts and might further those efforts going forward?
• How might we engage and cultivate them?

Use this looking ahead time to think about sustainability committee needs as well. Assess and identify the resources, information, professional development, and training that will ensure continual program growth and success.

• Is there enough buy-in from the right people?
• Who will best help grow our program?
• Should certain committee members be changed to include those with better ability to achieve the work ahead?

A key element of successful sustainability programs is a strong coalition built over time. Yet, to remain flexible and build capacity throughout the organization, the composition of most sustainability programs changes from year to year. This approach has many benefits. It helps avoid burnout. It also provides new leadership opportunities and engages employees with diverse perspectives and across traditional organizational boundaries. Inviting new people into the process, building internal capacity, and cultivating broad-based support helps you develop a deep bench and embeds sustainability further into your organizational culture.

Remember, sustainability is about managing change; it’s both a journey and a destination. Building a resilient sustainability program involves thinking ahead about what’s coming down the pike. This will prepare you to hit the ground running at the start of the next sustainability work cycle.

Stakeholder mapping & engagement

Sustainability work demands that a diverse group of stakeholders, with a clear understanding of mission, goals, roles, and responsibilities, be engaged to identify issues and opportunities across the wide range of topics under the sustainability umbrella. Mapping key internal and external stakeholders and developing transparent, positive information feedback loops with them can create competitive advantage. Organizations that are able to open and manage these kinds of communications with stakeholders, particularly in cross-functional working and advisory groups, become increasingly effective at creating value through sustainability work. Common understanding and better decision-making emerge and lead to more positive long-term results.

Management buy-in

Strong management support that empowers people, drives accountability and effective communications, and provides a healthy dose of praiseful recognition for sustainability work are key to engagement, team building, and program growth. Managers at many levels of the organization must be engaged at each critical juncture and commit to working on important sustainability issues. The ability to complete projects necessary to fulfill a strategy depends on many their willingness and permission to make things happen. To get that buy-in, many sustainability managers tailor their business case to each particular management audience, and focus on how the proposed work will help that audience succeed. This lays a solid foundation for getting buy-in and achieving a broad and deep level of organizational commitment, which dramatically increases the likelihood for success as a company moves from strategy to action.

Capacity building

Most companies require a significant amount of education and training to help a workforce understand and use sustainability best practices and systems thinking to a company’s advantage. Because sustainability touches so many business functions and requires buy-in from line workers to senior management, companies often implement a cross-functional, multi-level team structure to help build organizational capacity for doing this work. General training programs like lunch-and-learns are coupled with specific topical education during issue evaluations or project work to deliver a learn-while-doing benefit. Regular communications and education about the importance of sustainability efforts and recognition for positive outcomes serve to attract people to sustainability work and naturally develop capacity over time through engagement.

Process documentation (SMS)

Organizations with a well-documented sustainability management system (SMS) have an easier time tracking progress, auditing and verifying completed work, repeating successes, and learning from mistakes. An SMS serves as a roadmap to keep a program running smoothly. Having a concrete and accessible record of processes and activities enables an organization to easily manage staff turnovers and changes to the sustainability team composition. Expectations are set and become routine for annual activities like data collection and reporting. Companies that synthesize sustainability program management information in a concise, easy to follow manner are better able to focus on and realize continuous improvement from year to year.

Accounting for externalities

In economics, externalities are benefits and/or burdens that are not accounted for in pricing the goods and services. Positive externalities occur where benefits are provided, but not valued or paid for. For example, natural resources provide numerous benefits, such as cleaning the air, sequestering carbon dioxide and other ecosystem services that have tremendous value.

Negative externalities, on the other hand, are the by-products of many business operations, including pollution caused by the production process, such as carbon and other GHG emissions, water use, air and water pollution, land use conversion, and waste. Externalities also include the costs associated with workers’ adverse health impacts.

Historically, markets have failed to account for the social and environmental externalities of their operations. Because externalities are not included in standard accounting systems, they are not part of product pricing. Instead, the true costs incurred to address the damage are passed on to society. Often, this is the local community where the operating business is located.

Society usually stops footing the bill by passing laws and regulating behavior. When this happens, your costs go up. Think about increases in CAFE standards to regulate the pollution from motor vehicles. These increases in regulation have cost impacts on car manufacturers, who pass cost increases on to consumers.

Companies are beginning to understand that the true costs of products must be accounted for. One way to do this is through a Sustainability Profit and Loss statement, which assigns a financial value to environmental and social impacts along the entire value chain of a business. The “Profit” refers to any activity that benefits the company’s Triple Bottom Line, and a “Loss” refers to activities that adversely impact its Triple Bottom Line.

Accounting for externalities by assigning them a financial value helps businesses make better-informed decisions about how to manage risks and minimize footprints.

Business Risks

Externalities are a free ride that can catch up with you. If you are not accounting for externalities, you are at risk if and when society decides to stop footing the bill.

An externalities risk assessment can help you determine where to make efforts to change inputs and outputs or realign your products and services to less detrimental options. This can put you at a market advantage when externalized costs are recognized in the marketplace if your competitors have not analyzed these circumstances and taken similar action.

An externalities risk assessment is something to consider in supply chain management as well.

Information feedback loops

Information feedback loops (IFLs) provide vital information about how sustainability activity or inaction is viewed by stakeholders. Without that information, a company operates at a serious disadvantage and cannot fully understand how it is influencing its stakeholders – whether positively or negatively.

Getting good feedback is not always easy. It requires focused effort to determine who your key stakeholders are, define and open effective channels of communications, and build trust that efforts to provide feedback is worthwhile and valued.

Examples of Internal Information Feedback Loops and their benefits

All organizations have two “operating systems” that are often referred to as command and control system and adaptive, or hierarchical and networked. Each of these systems requires and provides different flows of information to operate. The success of a sustainability program often depends on knowing when to use each system and being able to effectively tap into and use the information channels associated with each system.

IFLs at the adaptive operating system level are great for pilot projects, using communications about trial and error to vet the best solutions for problems. In this kind of networked IFL, groups are closely connected and communicate across silos. They benefit from the experiences of others and work towards better solutions. Creating internal networks among employees who might otherwise not know of or be able to connect allows people to see what others are doing. It is an effective way to cull cross-functional organizational intelligence. It enables mid-level managers to get things right before proposing larger scale commitments that require significant resources.

IFLs at the command and control operating system level are most effective at scaling and efficiently executing programs. These hierarchical networks are more risk adverse and require program validation before being set in motion. Once buy-in is established, get out of the way! But also understand that if problems arise, a project can be halted just as quickly.

Examples of External IFLs and their benefits

It is also important for stakeholders outside the organization to provide input. The opinions and feedback given by external stakeholders have value. They provide insight from various perspectives and can help improve a sustainability program. To develop external IFLs, identify key external stakeholders and understand their needs and expectations. The type of external communication will depend on the stakeholder, but there are two main forms of communication – general public outreach and directed individual contact.

For some stakeholders, providing general ways to contact the organization (e.g., grievance hotlines, brochures with a company contact or suggestion boxes) gives them a specific place to communicate with the company. For other stakeholders, more intimate and personal IFLs should be set up, such as one-on-one meetings or direct contact that provides an opportunity for two-way conversations. This can include inviting stakeholders to participate in a materiality assessment survey or goal setting meetings or setting up periodic touch-base conversations.

Regardless of how the sustainability program utilizes external IFLs, it is critical that all stakeholders feel heard. Whether someone takes the time to call a grievance hotline or participate in a survey, the organization needs to make sure the stakeholder’s opinion is respected and heard, whether or not leadership agrees. This can be done by sending responses to calls and emails, and by acknowledging and thanking any stakeholder who participates in the sustainability program.

Why invest in building information feedback loops?

IFLs need time and resources to get established and stay maintained. Once set up, IFLs repay that investment through the benefits and advantages they provide.

Organizational efficiency and productivity improve because employees share best practices and receive prompt feedback. Employees are able to leverage each other’s knowledge and connect to and collaborate with colleagues outside an employee’s immediate work group. Connected employees are able to build relationships and trust with one another and the organization. This empowers employees and increases their organizational loyalty.

Trustworthy relationships are not only built internally among employees, but with external stakeholders. The two-way communication channel created by IFLs allows for stakeholders to receive information, analyze it, and respond with their opinions in an effective manner. Stakeholder trust increases since information is coming directly from the organization, with a clear way to respond.

With open channels of communication, organizations are able to receive feedback from a diverse crowd. This brings together disparate views and ideas and increases the likelihood of finding the best solutions. Better solutions can create competitive advantage.

How to create effective IFLs

IFLs are used to build the network of advocates and communicators a sustainability team needs to succeed. When creating and utilizing IFLs, be sure to welcome and encourage ideas so that stakeholders feel welcome to share their thoughts and ideas. But also take the time to educate and shape requests for feedback. Time spent framing sustainability concepts and issues, and clearly defining the parameters of communications, will go a long way toward ensuring feedback is and remains relevant and useful.

For internal IFLs, sustainability teams need to establish strong connections with business experts, sustainability champions, and decision makers or influencers. Identify and incorporate key individuals that are subject matter experts in areas of operations that have the greatest implications for sustainability work. Seek these people out and ask for input and advice; ask for commitments to keep sustainability managers in the loop about business decisions that affect the sustainability program and goals. Include these key employees in the Knowledge Base, then define the ways to communicate with and tap into the Knowledge Base.

Find sustainability champions and create ways for them to self-identify and engage. Connect them to the Knowledge Base network through issue assessment and project identification work and use those work-based IFLs to identify and build connections to people who have leverage within the organization. Build and use all of these internal IFLs to get buy-in for the business case for sustainability and help identify key leverage points within the organization for developing broader stakeholder engagement and feedback.

Existing communication channels to connect with external stakeholders may range from basic one-way processes to complex two-way frameworks. The ability to connect may vary from a highly restricted approval process to open access. After identifying the key external stakeholders whose feedback is important to the sustainability program and the desired means of communicating with them, the sustainability team will need evaluate and work to reframe any existing communications limitations. Having good IFLs with a solid internal stakeholder network is often foundational to overcoming these types of limitations on direct communications with external stakeholders.

Feedback loops are an instrumental tool for managers to stay abreast of information and viewpoints both within and outside the organization. In short, don’t wait until reporting season to gather information. To be effective, create and activate IFLs for regular and ongoing two-way communications with stakeholders.

Seeking stakeholder input

External engagement

Many organizations do not start with direct engagement with external stakeholders on sustainability issues. Instead, they get feedback from employees who connect on the job with key external stakeholders. This method of gathering external stakeholder views has a dual benefit. It provides an opportunity to educate internal representatives about sustainability. And it is a safe way to test the water for external stakeholder views on sustainability issues.

This is a good start. It prepares employees for direct conversations. And it reveals issues that stakeholders care enough about to have mentioned with little or no prompting. But sometimes employees say they are not hearing anything about sustainability from their external stakeholders. Beware that a lack of expressed concerns by external stakeholders to their business contacts may only indicate that the right questions have not yet been asked. It does not mean external stakeholders do not care about sustainability issues related to your organization or industry.

There are other ways to conserve resources on stakeholder engagement. You can begin by incorporating questions about sustainability issues into existing communication channels. Are you already doing customer surveys or one-on-one meetings with investors, suppliers, and other stakeholders? Just add a few questions or a short discussion about the stakeholder’s views on sustainability issues. Focus on the sustainability issues where you have the greatest impacts and risks to further conserve time and resources. Take the time to highlight how each key sustainability issue relates to your organization or industry. This will focus the question or discussion and generate higher quality feedback.

When you narrow your list of important sustainability issues and get better at discussing how those issues relate to your business, you can expand your engagement activities. For example, once you have identified projects in key areas, reach out to knowledgeable stakeholders to tap into their experience in those areas. Look for and seek advice from stakeholders with expertise in areas where you have yet to venture. Share your experiences with stakeholders who might benefit. These types of outreach will make your program more collaborative. You will ease into more engaging and fruitful two-way communications. Building relationships with stakeholders in this way often creates an environment where innovation and new partnerships can thrive.

As a sustainability program matures, engagement on sustainability issues between a company and its stakeholders usually get easier. If you are committed to continuous improvement, these conversations will deepen and produce greater benefits for all.

Internal engagement

It can be challenging to get internal stakeholders to focus on a broad array of sustainability issues. This is particularly true with busy company executives and senior managers. Yet those are the people who are key to the success of sustainability initiatives.

Often there is a disconnect because of a lack of knowledge about sustainability issues. Greater resistance from managers makes solid sustainability education even more essential. But how do you fix that? A good place to start is with the Issue Selection education. This lays a foundation for bringing people into the issue assessment process. Develop internal sustainability experts. They will be able to help others connect their work to sustainability issues. Create a story about how key sustainability issues relate to your business. By doing so you’ll have a better chance of getting support from internal players for the long term.

Start with sustainability issues that are most obvious for your company. As you build support for work in those areas, branch out to conversations about the next tier of impacts and possible risks. Ask about the internal stakeholder’s work or role, and explore whether there are connections to sustainability issues based on your knowledge of an issue. Don’t worry about perfection. Sustainability is a journey. You cannot do all the work in one year. You have time to improve knowledge of sustainability issues and understanding of organizational impacts and risks.

Stakeholder analysis

Stakeholder analysis helps you identify people who are key to moving forward with decision-making. These are the stakeholders whose perspectives will help you make better project or program choices. Doing this analysis helps you stay focused on what’s important and the people you need support from to be successful.

Gaining support from powerful stakeholders helps you get the resources needed to get work done. When done correctly, it ensures you are doing the right work, and involving the right people, in the right way.

This process of stakeholder analysis includes the following steps:

• Define the purpose of engagement. Why do you want to engage with stakeholder in the first place? Is the goal to identify material issues for your organization? Mitigate risks? Resolve a dispute? Gain new market access? Drive creativity and innovation? These are all important questions to consider when defining the purpose of your stakeholder analysis. Make sure you know what you want to accomplish before involving stakeholders.
• Make a list of stakeholders. Create a list of stakeholders who may be affected by your organization’s performance and outcomes. Identify which stakeholders are primary, secondary, and peripheral to the subject matter of your engagement. Your stakeholders may, and, probably will, change depending upon the purpose identified in Step 1. Each group will have a different position or type of influence, and level of importance, in relation to your organization.
• Map and prioritize stakeholders. Stakeholder mapping helps you identify different levels of interest and influence among your stakeholders. Use the matrix below to narrow the focus of whom to involve in the process:

As you can see, low to high influence over an issue runs along a line from the bottom to the top of the grid. Low to high interest in an issue runs along the bottom from left to right. Both influence and interest can be either positive or negative depending on the perspectives of the stakeholders involved. The people described as “key stakeholders” would generally appear in the upper right quadrant. The purpose of this diagram is to help you manage stakeholders with different perspectives and levels of influence. This will allow you to prioritize stakeholder engagement activities and better manage within resource constraints for these activities.

You should also consider a stakeholder’s willingness to participate and ability to add value to the process in terms of knowledge, resources, and expertise.

• Understand stakeholder interests. What “stake” or interest does a particular stakeholder have in the outcome of the proposed work? What motivates them most? Who else might they influence? Do you think they will be supporters and advocates or opponents and blockers? What is the preferred and most productive channel of communication through which to engage them? Who is the best person in your organization to engage them?

These are all important questions to think about before jumping into engagement with your stakeholders. You should have a clear reason and expectation for each engagement, especially in cases where you think a stakeholder is likely to tell you something you don’t want to hear.

Structuring stakeholder feedback

Once you have identified the stakeholders with whom to communicate and how you will communicate with each, you should focus on your subject matter. You will need to capture the stakeholder feedback data in a way that makes it comparable among stakeholders.

The best way to manage the data is to have stakeholders rate or rank issues using a uniform scale. But this should not preclude you from going deeper and engaging in discussions with key stakeholders. You will benefit from the insights and nuances of perspectives that only come out of conversation. If you capture these deeper explanations, they will enrich your reporting and the rationale for the decisions management makes at the end of the process.

The 5 Whys

The “5 Whys” is a technique used to explore cause and effect relationships that underlie a particular problem or failure. The primary goal of the technique is to determine the root cause of a problem or failed project. You do this by asking the question “Why?” until you get past symptoms to the root cause. In most cases, the root cause of a problem or failure turns out to be a process that is either not working well enough or does not exist.

Sustainability work is about change. Good intentions or even a solid plan can go astray when people are asked to change or think differently. The 5 Whys is a very handy tool for backtracking to see why and how a project or idea got off track or took an unexpected turn.

To make progress towards achieving sustainability goals, tend to what goes wrong just as intentionally as you celebrate what goes right. What you learn from the 5 Whys will often be more valuable than your small wins. These lessons will help you avoid bigger mistakes and problems that emerge when an undisclosed root cause is allowed to fester and take hold.

Using the 5 Whys

Sometimes you only need three Whys, sometimes you need more, but most often five will do the trick! The key is to feel confident that you are at the root and you’ve found all the causes for all the symptoms. Ask those involved in your project to participate. Their differing experiences and perspectives will enrich your discovery process.

The answer to each “Why” question forms the basis of the next question. A disciplined approach to this principle ensures a logical flow as one digs deeper into finding the root cause(s).

Here’s how to proceed:

Step 1 – Write down the specific problem, issue, or failure.

PROBLEM: The company did not meet its annual carbon reduction goal.

Step 2 – Ask why the problem happened and write the answer down below the problem.

QUESTION: Why didn’t the company meet its annual carbon reduction goal?

ANSWER: It consumed more fossil fuel-based energy than anticipated.

Step 3 – Ask why again and write down the answer.

QUESTION: Why did the company consume more fossil fuel-based energy than anticipated?

ANSWER: We were unable to implement the renewable energy solar projects we assumed we would be able to do on our facilities.

Step 4 – Ask why again and write down the answer.

QUESTION: Why were we unable to implement solar projects on our facilities?

ANSWER: We were unable to obtain permits for the solar projects.

ANSWER: We did not have time to explore alternatives renewable energy sources to meet the annual goal.

Step 5 – Ask why again and write down the answer.

QUESTION: Why were we unable to obtain permits for the solar projects?

ANSWER: We didn’t understand the permitting process or the potential roadblocks when we mapped out the timeline for these projects.

QUESTION: Why didn’t we have time to explore alternatives?

ANSWER: We did not monitor the permitting process closely enough and by the time everyone realized what was happening, it was too late and we had too few resources to make and execute an alternative plan.

The questioning for this example can be taken further, but five iterations of asking why is usually sufficient to show that a root cause of the failure was in the planning and monitoring process. The company did not have built-in contingencies and timeline triggers to avoid derailment of its goal. Or maybe the time allotted for achieving the goal was unrealistic.

Trace the chain of causality in direct increments from the undesirable end result back to a root cause, and you will be able to do better next time. You can use this information to iterate, optimize performance, set better goals, and make steady progress towards program success.

When the 5 Whys becomes part of how you manage, you may find that multiple problems and failures come from the same root cause. Some common root causes for sustainability programs are:

• not having enough buy-in from the right people,
• a lack of accountability, or
• inadequate resources.

These are all indicators that your program may be outpacing your company’s readiness for sustainability. When this happens, you will need to regroup so that your program is paced for your culture. Go back to basics and focus on building a solid business case for sustainability, tuning into roles-based persuasion, and engaging employees. When people care about sustainability work, they will find ways to make sure things get done right and on time.

Sustainability management systems

A Sustainability Management System (SMS) is a set of management processes and procedures. It is a well-thought out, organized framework within which to review and improve an organization’s environmental, economic, and social sustainability performance.

An SMS serves as a guide or “roadmap” for moving a company toward greater sustainability in a systematic way. The SMS provides the specific process an organization uses for doing sustainability work. It tells how an organization identifies, coordinates, implements, and improves its sustainability efforts. It shows how sustainability is integrated into day-to-day operations.

An SMS also functions as a guide for report audit functions. Independent third parties can use the SMS to understand and verify how sustainability information and data is developed, gathered, and processed into a report. In this way, the SMS supports accountability, accuracy, completeness, and transparency for sustainability work.

Key elements of an SMS

The elements of an SMS include who, how, and when the organization:

• Creates and updates the short and long-term vision, goals, and policy commitments for sustainability
• Develops strategies for meeting sustainability goals and commitments
• Establishes an inventory and baseline of company-wide resource consumption (e.g., energy and natural resources), greenhouse gas emissions, and waste generation, diversion, and recycling rates, among others
• Benchmarks against baselines
• Identifies actual and potential sustainability impacts and risks
• Identifies and meets all sustainability-related requirements (both legal and stakeholder driven)
• Establishes sustainability work priorities and related goals, targets and KPIs
• Creates and implements action plans to achieve sustainability objectives
• Tracks, memorializes, and evaluates progress and systems, including controls and procedures that govern data collection and record keeping
• Analyzes whether the SMS is working as planned
• Takes preventive or corrective action
• Makes improvements to the SMS

Why build an SMS?

The SMS is a dynamic and evolving document. It builds on existing practices and reflects changes as an organization addresses systemic issues and new challenges. It captures the incremental changes that move a company toward continual improvement. The idea is that anyone could read your SMS and understand how and when sustainability work occurs in your organization.

For larger, regulated, or public companies, an SMS is particularly important. It guides, enables, and streamlines auditing and third-party assurance for sustainability reports and data. These third parties can follow the SMS to validate who sourced the information, and how and when they did so. This reveals the relevance, accuracy, completeness, and reliability of the resulting sustainability information. Validation provides management the information needed for evaluating, qualifying, and approving sustainability information. It enables decision-making about what the company will disclose and to whom.

Create your SMS as you go

As you follow the Sustrana Process, document the process and practices you follow and you will have established a customized SMS. Review your action plan, particularly your Sustainability Committee work. When does each type of work occur? Who is responsible? Whom do you need to involve? What organizational procedures do you follow? Whose approval did you need? What methodology did you use to collect information and get the results you achieved?

Your goal should be to create a document that makes it easy for everyone to understand and recreate what you do. This will help everyone plan for the next cycle. It will also help you identify ways to improve so that your results are increasingly relevant, accurate, complete, and reliable.

Meaningful work & engagement

Employees are crucial to creating a sustainable business. Engaging employees in all aspects of your sustainability program will be a key determinant for the success of your initiatives. The challenge is tapping into this power.

Why is employee engagement so important?

Actively engaged employees are far more motivated to work towards company goals than disengaged employees. Gallup’s 2016 “State of the American Workplace” report found that over 50% of workers fall under the umbrella of not engaged (emotionally detached) and actively disengaged (negatively view the workplace). Employees who are “checked out” while at work can mean significant negative consequences for business outcomes. A person’s engagement – or lack thereof – can create a “cascade effect” that spreads to other employees and beyond. There is a lot of room for improvement when it comes to employee engagement, and sustainability programs can help.

Having an actively engaged workforce can lead to many company benefits, some of which include:

• higher levels of innovation and productivity
• increased operating and net profit
• better organizational performance
• improved customer focus
• higher employee morale
• lower levels of absenteeism
• higher levels of staff retention
• improved talent attraction

For many companies, focusing on the triple bottom line of people, planet, and prosperity pays a dividend in recruiting and retaining top talent.

The power of purpose

The critical link between employee engagement and sustainability strategies is purpose. A growing number of people crave impactful work where they can make a positive contribution. One study found that 65% of workers said that “the potential to contribute to society” and “a job that will make the world a better place” is very important to them, with about 25% considering this to be essential.

Younger generations, and Millenials in particular, want to work for companies that are socially and environmentally conscious. The Net Impact Talent Report What Workers Want in 2012 showed 88% of graduate students factor an employer’s corporate social responsibility (CSR) efforts into their job decision. And 86% said they would consider leaving their job if the CSR program was not upheld.

Finding work with purpose – a deeper role beyond just satisfying finance-based business goals – is one of today’s top considerations in job acceptance decisions. Work with purpose is also a core driver for a culture of innovation and creativity. The shared goals that define purpose help create a bond and a sense of trust between employer and employee. This is, in turn, a key ingredient in high performance and productivity.

Meaningful work is a powerful driver of workforce attraction, retention, loyalty, productivity, and well being. It has the remarkable power to energize employees and make the organization come alive. This is more than just “feel-good” speak. A case study from accounting firm KPMG shows the positive impact work with purpose can have.

Case study: KPMG

Convinced that today’s employees crave a sense of purpose in their work, the accounting firm KPMG launched an initiative to inspire higher levels of engagement. A key component of KPMG’s approach was cultivating a strong emotional connection between employees and the firm. Priming the conversation with some examples, they asked everyone – from interns to the CEO – to share stories about how their work was making a difference. KPMG discovered a “pent up appetite” for employees to find and express what meaning work holds for them. Employees flooded them with stories and morale skyrocketed. In just a few weeks, they collected more than 40,000 stories that were shared with the entire workforce through posters and on-line postings.

The results of their purpose campaign exceeded expectations. Within a year, the firm experienced higher employee satisfaction and loyalty, and greater productivity. According to KPMG’s annual partner survey:

“90% reported that the higher purpose initiatives increased people’s pride in KPMG. Scores on our employee engagement survey rose to record levels as well. Less than six months into our Purpose initiative 85% of employees agreed that KPMG is a great place to work, up slightly from 82% a year earlier; after a year scores on this same question rose to 89%. Additionally, 60% said our purpose initiative strengthened their pride in KPMG and our work. This improvement in morale also resulted in KPMG surging 17 spots on FORTUNE magazine’s annual 100 Best Companies to Work For list, making us the number one-ranked Big Four firm for the first time in our history.”

What this means for business

Companies that are flourishing – in terms of engagement, productivity, and profits – are animated by a sense of purpose. As the case study above shows, to be successful over the long term, companies must first win the hearts and minds of their employees.

Organizations working to become sustainable are well-positioned to realize this potential and accelerate employee engagement. But this only happens when employees’ personal duties are connected to a larger purpose. This is easier to do when companies link sustainability efforts to business objectives and vice versa. That’s because sustainability is about caring for people and the planet. And as David Cooperrider, founder of Appreciative Inquiry says, “The quest for a flourishing earth is the most significant human and organizational development opportunity of the 21st century.” This only happens when employees understand the larger significance of their work: when personal duties are linked to the fulfillment of the company’s larger purpose.

Many companies are integrating sustainability education and projects into training and development programs. This involves educating employees about why sustainability is important, how it relates to employees’ work, and what they can do to contribute. Sustainability projects are effective ways to engage employees in meaningful work. This engagement is, in turn, a good strategy for building support for sustainability across your organization.

When employees are engaged, there is a greater sense of ownership and desire for sustainability initiatives to succeed. Some companies make the mistake of outsourcing sustainability work to external groups or consultants. By doing this, they miss a huge opportunity to engage employees in something most, if not all, of them crave: meaningful work.

Presentations

With education and Pitch Decks, you will have the knowledge and tools to create a powerful presentation of your company’s business case for sustainability. But is that enough?

We don’t think so. There are elements of a great business case presentation that you will need beyond sustainability knowledge and the research embodied in the Pitch Decks. Here are some best practices:

1. Make your presentation look good. Get help from someone who does marketing! You are selling an idea. There’s likely a lot of competition for time and resources in your organization, so make the time you have leaders’ attention really count.
2. Know your audience and talk to them. Don’t be so proud of your work that you forget the audience! Tailor each presentation you do to the particular audience. Every bit of information should be relevant to someone in the audience. Use a more general presentation for big, diverse, group presentations. Focus and emphasize when you have a smaller or more narrowly defined group. Use language that’s familiar to your organization.
3. Think like a businessperson. Don’t forget that you are bringing sustainability to a business. Sustainability is not the most important thing to everyone; for most, the individual’s job responsibilities are most important. Don’t preach sustainability; demonstrate business value. It is a very rare individual who will overlook business responsibilities because it’s the right thing to do! Many will do the right thing if you can show them how doing so will make what they already do well even better.
4. Be well prepared; have robust research. Be sure that your source materials will be respected by your listener. Use fact-based research rather than opinions. A major consulting firm’s study that shows increased market share for sustainable products with a specific additional cost spread is much more convincing than an online news blog survey in which a majority of consumers says they prefer sustainable products and are willing to pay more.
5. Use relevant examples to intrigue and engage. An example of how a manufacturing company saved millions will not persuade someone in a services sector business. Have case studies from relevant sectors – use competitors, partners, and customers if you can find them. If, for example, your company uses a lot of paper, and a competitor has saved millions by implementing electronic communications, use that!
6. Connect with your message. If you don’t believe in your message, neither will your audience. This doesn’t mean getting overly-emotional or preachy. You just need to be and come across as genuine, trustworthy, and authentic. This is easy to do when you connect to what you’re saying and are honest with yourself and others about what you are trying to achieve. Try to fake it or go in with ulterior motives and your audience will sense that something is not quite right. You don’t want your audience to wonder what you aren’t telling them.
7. Create a succinct presentation. Business leaders are short on time. Make sure your presentation is to the point and addresses issues they care about. Be sure you can get through everything within the time allotted and still have time for questions and discussion. Feedback is more valuable than those extra slides you think will drive a point home!
8. Be prepared for questions. Brainstorm with a small group about your audience (preferably people who know the folks you will be presenting to). Think about your audience’s business roles. What details might they need or want when they see slides that address issues they care about? Adding an appendix at the end of your presentation with slides covering aspects you think they might ask about is a great way to be prepared without overloading the presentation.

These points are really about being able to persuade and motivate. This is a skill you can learn. Don’t underestimate the value of pre-meeting work on these points to making your presentation a win-win.

That’s it! You’re ready to get started with Pitch Decks.

Internal vs. external stakeholders

An organization’s internal and external stakeholders can both affect an organization’s ability to thrive. A stakeholder’s concerns and ability to influence reveal barriers or enablers for business success. Evaluating these indicators of success is an essential part of determining “who and what really counts.”

Internal and external stakeholders represent a range of interests and concerns. In some ways, their interests may align with business goals and objectives. In other ways, they may diverge. It is up to leaders and managers within the company to determine whether a stakeholder perspective warrants action or a change of course. These decisions are based on the legitimacy and salience of stakeholder concerns. But the company must also take into account ability to influence when deciding what to do and how quickly to do it.

Internal stakeholders

Internal stakeholders are highly affected by the decisions and performance of the organization. They are the individuals who work for, manage, govern, own, or invest in the company.

Absent internal stakeholders, the company would be unable to provide goods and services to the marketplace. Internal stakeholders are “insiders.” They know the inner workings of the organization and have an informed perspective. They shape and are actively shaped by the company’s culture.

Their knowledge, skills, and level of engagement can influence the success and steer the direction of the company. But ability to influence is not always dictated by position. Consider some examples of how internal stakeholders can influence decision-making:

• A CEO tries to take the company in a new direction with long-term, but not short-term, benefits. The Board of Directors fires the CEO for doing so.
• An entry-level employee leads a new community impact project. The project ignites employee engagement like nothing else has, and becomes an annual signature event.
• Employees take a “bottom up” approach and form a green team to bring about change. They gain a strong base of employee support, achieve some quick wins, and show management the value of their work. The management team decides to support a new initiative that leads to the creation of a new product.
• An employee is injured on the job because of safety issues that have been flagged, but not fixed. Workers stage a protest work slow down that costs the company twice the cost of fixing the issue.

External stakeholders

Organizations could not exist without external stakeholders as well. They provide the context in which an organization operates. Some provide resources or buy products or services; others compete. Altogether, external stakeholders provide the market feedback on which a business makes decisions. Without this context, a company would have no way of gauging its ability to fail or succeed.

External stakeholders do not take part in the day-to-day activities of the business. But they have perspectives and opinions about the organization and its products and services that, in varying degrees, affect the viability of a business.

External stakeholders exercise different levels of power and influence. They can influence and be influenced by organization’s decision-making process in a variety of ways. Key among those are economic or political pressure. Consider the following examples of how external stakeholder pressure can influence decision-making:

• A supplier is at risk of losing business because a major customer has a new sustainable purchasing policy. To keep the customer and attract new business, the supplier redesigns its products and means of production.
• A well-respected NGO calls attention to a company’s whose employment and environmental practices they find sub-par. The company sees a decline in sales and lots of negative social media chatter.

The interconnected world of stakeholders

There is a tendency to think of stakeholders in a hierarchy of importance with internal stakeholders being the most important, then direct external stakeholders, and last indirect external stakeholders. But the truth is, importance is always relative to a stakeholder’s degree of satisfaction with the company and ability to influence.

Stakeholder groups do not exist in isolation. In the new digital media environment, an internal stakeholder can influence the preferences and priorities of an external stakeholder, and vice versa. Consumer trends can influence investor trends. Government regulations can impact management decisions. NGOs can influence the decision-making process of a Board of Directors. Internal and external stakeholder expectations, interests, preferences, and ability to influence are fluid. This underscores the importance of regularly evaluating these factors and how they might affect the company.

Strategic relationships

Today’s environmental, social, and economic challenges are complex. Most companies cannot make a material difference by themselves. By participating in partnerships and other relationships that connect within and across industries, government, and civil society, companies can hurdle market barriers and create meaningful positive change. This is the essence of strategic relationships: they are collaboration-based partnerships with organizations that align with a company’s core values and strategic goals.

Strategic relationships create what Michael Porter calls Shared Value. Shared value lies at the intersection of society and corporate performance. It represents the simultaneous pursuit of economic and societal value by addressing needs and challenges that benefit both the company and society.

A key component of creating shared value lies in the ability of for-profit companies to collaborate with nonprofits. These partnerships between business organizations and NGOs are an important strategic relationship. Together, they can prioritize projects that target areas aligned with their mutual values for environmental and social responsibility. NGOs are able to share best practices, which companies can leverage to boost their own sustainability performance. Companies can contribute resources, time, and talent to support and partner with organizations focused on environmental and social responsibility. They can share resources towards and enhance capacity for achieving mutual goals.

Leading companies are creating strategic relationships in new ways. They establish relationships and partnerships with their stakeholders all along the value chain. They take a systems perspective, understanding how each part of the system is connected to the whole. They collaborate on efforts to explore and create new market opportunities for products and services that support key environmental and social goals in addition to creating market value. They even work with competitors to remove market barriers and open a new market within which to compete. Through partnership and collaboration, companies can make sustainability progress not otherwise attainable on their own.

Effective meetings

Sustainability Committees quickly lose momentum when they waste time or fail to engage those in attendance. Read on to make sure this doesn’t happen to your sustainability team.

Identify the meeting purpose and required attendees

A tried and true rule for effective meetings is to invite only those people who are needed for a discussion or decision. To do this effectively, first be very clear on the goals of the meeting. Then decide who needs to be there to accomplish those goals – no more and no fewer. This will allow you to hold shorter meetings rather than fill up an hour or more with discussions that don’t involve everyone in attendance. If part of the discussion involves a subcommittee matter, save that for a subcommittee meeting, or hold a smaller, separate meeting. Everyone will appreciate this, and your team will feel effective, efficient, and engaged.

Each group should manage its work by setting meeting agendas, inviting attendees, listing various things to be reviewed and discussed in the meeting, and recording notes of what happens at a meeting.

Understand the cycle of sustainability planning and management

The entire sustainability committee is often involved in certain phases of work. Early on, this includes team building, strategy, and plan development. Later, it transitions to managing program implementation and reporting.

The work of managing program implementation may be divided among sustainability committee members, as necessary to make sure projects stay on track. Actual project work should be implemented by teams of people with knowledge and experience in the business function to which a project relates. These are members of your Knowledge Base, including outside vendors. Project teams can and should hold their own meetings. The status and progress of project work should be regularly reported to the sustainability committee for discussion and management-level decision making.

When do you need a full sustainability committee meeting?

The Sustainability Committee needs two types of meetings: planning meetings at the beginning and end of a program cycle; and regular status meetings on the project implementation progress. Once this gets rolling, project teams will update the sustainability committee on status. Monthly status reports can be achieved in meetings that may only take 15-30 minutes. Or project teams can regularly update project status in a centralized action plan that the sustainability committee can review during a sustainability committee meeting.

Planning meetings, however, may require longer blocks of time. During planning for a new strategy or the next cycle of work, sustainability committee meetings often increase in both length and frequency.

When do project teams meet?

The sustainability committee is responsible for getting projects assessed and approved for implementation. But other than the strategy and planning work described above, the sustainability committee is often not involved in project implementation. Each project will be assigned to a team of individuals (which can include outside vendors) based on relevant knowledge and experience. Sometimes a sustainability committee member is assigned to a project team to act as a liaison.

Each project team should have its own separate meetings to work on implementation. The number and duration of project team meetings will depend on the scope and timeline for the particular project. When project teams record progress in a centralized action plan, everyone can stay up to date on the organization’s sustainability work.

Communications channels

Digital technology and social media have transformed the communications landscape. There are now many communication channels through which to reach stakeholders – and for stakeholders to talk to and about a company.

What was once a one-way, narrow dissemination of information through newsletters, press releases, and the like is now more often a dynamic two-way, transparent process of dialogue and engagement between a company and its stakeholders.

For external communications, consider the following channels:

• Company website
• Blogs
• Webinars and Videos
• Press releases
• Newsletters
• Reports
• Public documents for compliance
• Face-to-face meetings

For internal communications, consider these channels:

• Company intranet and microsites
• Email
• Presentations
• Training Programs
• Face-to-face meetings

You can probably think of more! The expansion of communication channels brings with it positives and negatives:

• Communications via social media (e.g., Facebook, Twitter, Pinterist, Google+) provide a quick and easy way to segment audience and share goals, experiences, and success stories.
• Stories that once might have withered and died in a one-day print media news cycle, can go viral in a matter of hours over the Internet.
• Companies can start out on a particular channel, but can no longer control where content ends up.
• Communications can quickly cross-pollinate and propagate across multiple channels.

Because of digital technology and social media, external stakeholders have much greater influence over and access to communications from and about a company. This makes it more important now than ever to make sure communications are well informed, accurate, and consistent regardless of the initial channel you choose. Whether you want to be transparent or not, transparency is often a market outcome of modern-day communications.

All channel choices matter

The channel often defines the scope and tone of the communication. It should not cause you to vary your standards for the accuracy, validity, and credibility of the sustainability information you communicate.

Content should be appropriate for and tailored to the channel. When selecting a channel, you will want to think about the purpose of the communication. You will also need to think about your audience and what is the best way to reach them. Do you want to inform customers about a new product or service? Engage with stakeholders about a new initiative? Get feedback from employees? Your objective should help determine whether you communicate with your intended audience via tweets, a sustainability report, email, or other medium. It will also guide the type and amount of information.

There is such a thing as too much information. This underscores the importance of carefully selecting the appropriate information for a particular communication channel.

Be sure to always confirm the accuracy, validity, and credibility of the sustainability claims you make. Otherwise you are at risk of being accused of greenwashing. This means you must carefully consider ALL content. Don’t make the mistake of assuming that because the information is on your website that it’s in a “safe zone”. Any marketing claim about the environmental attributes of products or services are subject to FTC Green Guides principles.

The bottom line: fact check the validity of your sustainability claims before communicating to stakeholders through any communication channels.

Throughout Sustrana education, you’ll find information about communications with various stakeholders. It’s important for you to explore these areas before developing content and choosing a communication channel.

Building an SMS

A company develops an SMS based on existing sustainability policies, practices, and procedures, and revises it from time to time for continuous improvement. It is a dynamic system and evolves as new circumstances arise. It reflects the P-D-C-A the cycle of:

1. Plan. Establish goals and the processes necessary to achieve them
2. Do. Implement the processes
3. Check. Monitor and measure what was implemented. Was the plan effective? Did you implement in accordance with the plan?
4. Act. Make adjustments to continually improve performance

Managing anything is easier with a process. Managing a sustainability program is no different.

The goal is to create a document that makes it easy for each team member to understand and recreate what needs to get done. This will help everyone plan for the next cycle. It will also help identify ways to improve so that results are increasingly relevant, accurate, complete, and reliable.

The first time you go through a sustainability work cycle using the Sustrana Process, record the “how” of what you did, who was involved in each process step, and any ways in which you tailored the Sustrana process to meet your needs. From there on, you should note revisions, deviations, improvements, and additions to your processes.

The Committee action plan follows the Sustrana process. The first step for capturing your organization’s processes and practices is to review the Group Workspace activities.

Getting to the details

Here are some questions to consider to help you create your SMS:

• Which parts of the Process did you follow?
• What steps did you take in addition to or differently from the Process?
• How did you identify impacts and evaluate risks?
• When did each type of work occur?
• How was responsibility assigned?
• How and what baselines did you establish and/or benchmark against?
• Whom did you involve from your company’s Knowledge Base and how? From your key stakeholders?
• What organizational procedures did you incorporate and follow?
• Whose approval did you need and what process did you follow to get it?
• What methodology and controls did you use to collect information and verify the results you achieved?
• How was education assigned or delivered, to whom, and when?
• How did you identify what didn’t work and what corrective measures to take?
• What process did you use to capture the lessons you learned?

Sustainability basics

Basic sustainability education starts with core concepts so that you can speak the language of sustainability and understand why so many businesses are paying attention to it. You will use that knowledge to help you tailor a business case for sustainability to suit your organization. A solid business case makes sustainability a must-have, not just a nice-to-have for your organization.

To get grounded, here are some definitions that will help you understand what sustainability is all about.

The main idea

A simple dictionary definition of sustainability is the “capacity to endure.” Implicit in that definition is the concept of thriving into the future. What are the basics essential to having the capacity to thrive into the future? Below are some that come to mind. Does the list change when you are thinking of present needs or expectations in developed vs developing countries?

The capacity to endure requires balancing short- and long-term perspectives to managing risks and seizing opportunities that arise from current conditions and trends. To do this you have to examine, balance, and integrate social, environmental, and economic considerations.

The sustainability story

Back in the early 1980’s, the United Nations wanted some deeper thinking done on this concept of enduring into the future at a global level. It set up the Brundtland Commission, which produced Our Common Future: The Report of the World Commission on Environment and Development in 1987. This report contained the most oft-cited definition of sustainability:

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

The Commission described development as what humans do when they interact with each other and with the environment. And, if our planet and our species are to endure, we need to be mindful of today’s impacts on opportunities for future generations.

There are other, business-oriented formulations of the sustainability definition, but they all reflect the most oft-sited definition from the Brundtland Commission.

Boil that down for me!

Can you see how the Brundtland Commission definition of sustainable development becomes a tricky balancing act? You need to understand what resources are available, what our present needs are, and what future needs might be. Take another look at the capacity to endure graphic above.

Sustainability isn’t about cutting back so that we are deprived of what we need. It’s about eliminating waste and transitioning to better solutions so that we can live within our planetary means. It is about thinking creatively, innovating, and learning how to do more with less and make planet and people friendly products. It’s about getting what we need without the bad impacts. It’s thinking about how to define and change our concept of needs and how we meet them!

As sustainability leader Jim Hartzfeld says, “Sustainability means thriving lives for all within the means of nature.”

Business sustainability

What is sustainability for businesses?

Business sustainability means looking at the impacts a business has on people, the environment, and the economy. This helps you assess and manage risks and opportunities and make better decisions for the long term.

Companies become more sustainable by balancing present-day concerns with nurturing a company’s capacity to thrive into the future. Business sustainability is a management practice that makes for a brighter future.

The big picture

 

When you start exploring social, environmental, and economic impacts and risks, you quickly realize that sustainability is a broad, deep, and rich topic.

Definitions for business

Here are a few definitions of sustainability that we use in a business context. Maybe one of these will suit the way you want to describe sustainability for your organization.

The Dow Jones Sustainability Index:

“Corporate Sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.”

Andrew Savitz in The Triple Bottom Line:

“A sustainable company is one that creates profit while protecting the environment and improving the lives with whom it interacts.”

An Eloquent Anonymous Person:

“A sustainable organization engages in the simultaneous pursuit of economic prosperity, environmental stewardship, and social responsibility.”

A note about Sustainability vs CSR

Maybe you’ve heard a variety of terms and meanings used when talking about sustainability. Some companies refer to Corporate Social Responsibility (CSR) or just Corporate Responsibility (CR) instead of sustainability. Sustrana uses the term sustainability. We do this because sustainability extends beyond corporate philanthropy, risk management, and avoidance of harm. At its core, sustainability is about value creation and innovation.

We don’t really care what term you use, but we do care about getting everyone on the same page in understanding what this work is about. That’s important if you want to avoid misunderstandings. With a solid grounding in the basics, you can craft your own specific way of describing what sustainability means for your company without losing touch with sustainability’s best-understood meaning.

Resources

• Redefining Sustainable Business: Management for a Rapidly Changing World

History of evolving views

Sustainability did not become a “hot” topic overnight. The history of how sustainability emerged as a business management tool starts with dramatic shifts in our ability to harness natural resources.

The Industrial Revolution

Humans are endowed with powerful brains, opposable thumbs, and unique dexterity. Since the Stone Age, we have differentiated ourselves by our ability to put Earth’s resources to new and expanding uses. That ability dramatically increased with the Industrial Revolution some 300 years ago.

The use of Earth’s natural resources since the Industrial Revolution has had many environmental, social, and economic impacts. Many are positive; many are not.

Industrialization created many complex and interconnected systems. For example, new manufacturing systems were based on mechanization and mass production of goods. These new systems in turn depended on the construction of large-scale infrastructure such as railroad, highway, and communications systems. These systems have brought huge improvements in our quality of life.

Throughout our period of industrialization, these new systems have also increased demand for natural and human resources. Industrialization has created new and larger streams of waste and pollution, affecting environmental and human health. At times, industrialization has given rise to corruption or resulted in sweatshop working conditions. Unsafe workplaces, unfair wages, unreasonable hours, child labor, and a lack of benefits for workers have been fodder for outrage and protest.

Rachel Carson’s contribution

In the 1950’s, a woman who ran a private bird sanctuary in Massachusetts wrote to scientist and author Rachel Carson, who worked for the US Fish and Wildlife Service. The woman was horrified to find scores of birds dead and dying two days after the cheap and widely used insecticide DDT was sprayed. Carson began several years of research that culminated in the publication of her book, Silent Spring, in 1962.

Silent Spring did two important things. First it demonstrated nature’s balance between soil, water, and organisms and how fragile the balance is. Carson showed how the unfettered use of DDT lead to the near extinction of the American bald eagle, a national symbol. As water moved DDT into the soil, organisms at the beginning of the bald eagle’s food chain absorbed it. While the DDT did not kill those organisms, the accumulation of DDT from eating many organisms killed birds.

Carson’s work is a seminal example of how systems thinking reveals unexpected problems. Something that is safe at a basic level, can become lethal when we broaden perspectives and consider relationships within a larger system.

Carson also used her knowledge of natural systems to suggest affordable, safer, and longer lasting ways to use nature to solve the problems that DDT was invented for. She showed that working with a system, rather than using brute force, could innovate better solutions.

The 1960s was a time when people from all walks of life started to find their voice on a range of issues stemming from years of industrialization. These include environmental degradation, social justice, and economic prosperity for all. From the 1960s forward we have seen sustained action on sustainability issues, with growing momentum towards positive and progressive change.

A new perspective

For all of our advances in solving social, environmental, and economic problems, we are still on an unsustainable path. For many years, we have used our legal system to right wrongs and protect and promote the benefits of industrialization. Our ability to do this through labor, corporate, and environmental laws makes us great in so many ways. But, like a game of whack-a-mole, sometimes you’re so busy whacking your most immediate problem, you can’t see what you’re up against beneath a generally beautiful lawn!

Sometimes, you need to take a step back and take at a broader view to gain perspective and find new and better solutions.

The Overview Effect

Step back in time to when Neil Armstrong and Buzz Aldrin took their first steps – and a giant leap for mankind – on the moon on July 20, 1969. Prior to that, people grew up with a very two dimensional view of our planet, a view that began to change as images of the Earth from outer space became part of our collective consciousness.

We now refer to the implications of seeing the Earth as a pale blue dot, hanging in the harsh environment of space, protected by a thin and fragile atmosphere, as the Overview Effect. Astronauts have experienced the Overview Effect in a profound way. Lines that divide our two-dimensional view of the planet disappear. National boundaries, cultural differences, and conflicts over resources lose meaning. The reality of our shared position in a vast solar system and a more vast universe takes hold.

The realization of the Overview Effect is often expressed in terms of sustainability thinking in these statements:

• We are one planetary community
• Our natural resources and ecosystem services are all we have for survival
• There is no “away” for the waste and pollution we create on planet Earth

These perspectives prompt us to think of ourselves as part of a much larger system whose survival depends on how we live, work, and play in our corner of it. We live as Russian stacking dolls, systems within systems. As John Muir said, “When we try to pick out anything by itself, we find it hitched to everything else in the universe.”

When we think about family, workplace, local community, resources, weather, geographic regions, or nations, the Overview Effect beckons us to shift:

This systems-based perspective is a new approach to address many of the ills from the Industrial Revolution and make our lives on Earth sustainable. We are learning to “Think Globally, Act Locally” – the antidote to a whack-a-mole approach.

Systems thinking

Systems thinking is an essential framework for sustainability thinking, practice, and goal setting. A systems approach helps us understand the systematic nature of sustainability. It highlights the relationships and connections between sustainability’s primary systems: economic, environmental, social.

All the global interconnections between people, the planet, and prosperity form a pretty complex picture. To become sustainable, systems thinking is a useful and critical way of thinking about complex problems and finding solutions. It helps you understand:

• the general nature and function of affected larger systems, like Earth’s ecosystems and climate;
• how you interact with those systems;
• how you contribute to problems; and
• what you can do to be part of the solution.

Sustainability requires a holistic understanding of how things work together. It looks at the kinds of systems that make up the economies, societies, and ecologies that sustain us, how they interact with each other, and how to keep them going into the future. Systems thinking is an essential part of sustainability. A systems approach helps people understand the complexity of the world around them. It encourages them to think in terms of relationships, connectedness, cycles, and feedback loops.

As we have gained scientific knowledge, there has been a shift in how we think about the world. We now understand it as a complex adaptive system, rather than a linear equilibrium system. All elements within the world system function as networked and linked together, rather than as separate, unrelated units. This represents a conceptual shift in thinking about how things work at the macro level. It’s not that the conventional way of thinking is wrong – it’s just that it has become outdated. Systems thinking is a different way of looking at things. When you begin thinking about complex social, economic, and environmental problems, you must broaden your perspective. This might be hard to wrap your head around at first, but here’s an easy way to think about it:

You may have never thought about it this way, but you and everything else around you is part of a bigger system. This is at the core of sustainability. Think of your business as a system within a system. What you do within your business system will affect other parts of the larger system. That is why it is so important when making business decisions, choosing projects, and setting goals that you consider how your actions affect the larger system.

The next section explores the global forces that are driving businesses to adopt sustainability management.

Resources

• How to Handle Complexity
• Leverage Points: Places to Intervene in a System

Planetary boundaries

Human civilization is an integrated part of the Earth’s biosphere. All human activity and life itself depends on the health and continued functioning of ecosystems. This means we need to manage our impact on the environment so we can maintain human well-being now and into the future. Sustainability is aimed at the alignment of human activity with the inherent limits of ecological systems.

Planetary Boundaries

The Stockholm Resilience Centre researches and reports on the capacity of ecological systems to meet the needs of a growing global population. The Center has identified nine critical planetary processes and systems that help maintain the stability and resilience of the Earth’s natural systems. The Center has set nine corresponding Planetary Boundaries to show what we need to do to keep civilization within a “safe operating space.”

A report released by the Center in January 2015 finds that human civilization has now exceeded four of the nine Planetary Boundaries. Thresholds of climate change, biosphere integrity, land-system change, and altered biogeochemical cycles have been crossed. In other words, civilization has pushed beyond levels that would ensure a “safe operating space” for humanity.

According to Steve Carpenter, one of the report’s authors, the findings are a wake-up call. “We’re running up to and beyond the biophysical boundaries that enable human civilization as we know it to exist,” says Carpenter. Two core boundaries in particular – climate change and biosphere integrity – have the potential to shift the Earth’s systems to an entirely new state should they be continually and further breached.

Is it possible for humanity to live beyond the parameters that have made Earth remarkably stable and hospitable for last 11,700 years? This is an important question to consider, but it does not come with a clear answer. Under the precautionary principle, it would be wise to work toward maintaining rather than pushing beyond the Planetary Boundaries that allow life on the planet to flourish.

The Triple Bottom Line

If sustainability is about getting what we need without the negative impacts, how do you make sure you aren’t creating or continuing those impacts? The first step is to look at the social, environmental, and economic impacts of your decisions.

People often refer to this three-part analysis – social, environmental, economic – as the Triple Bottom Line approach. It covers how people interact with each other and with the planet, as well as the ways in which various economic systems facilitate those interactions.

As you analyze your impacts, keep in mind that each part deserves equal weight and consideration. If you envision the Triple Bottom Line as a three-legged stool your organization sits on, you’re on pretty stable footing. Shorten your attention to one of those legs and OUCH! We’ll be singing the blues when you teeter and topple!

Triple Bottom Line Valuation

The bottom line in accounting terms means the very bottom line of a financial statement (roughly speaking, revenue less expenses, which gives you profit). This traditional business valuation method measures, places the highest value on, and seeks to enhance financial and productive capital. But it misses other components of business value: human and environmental assets.

As a concept, the Triple Bottom Line resets this single bottom line approach to valuing an organization. This method captures the missing pieces and provides insights about whether a business is creating long-term value. The Triple Bottom Line takes into account the value an organization has amassed in three areas:

• social value (sometimes called social capital),
• environmental value (sometimes called natural capital), and
• economic value (sometimes called economic capital)

Here’s the tough part. The marketplace is just starting to develop frameworks and metrics for valuing sustainability behavior and activities and how they impact an organization’s overall value. So getting organizations to focus on all three aspects of the Triple Bottom Line can be a challenge!

But interest in Triple Bottom Line accounting has grown in all sectors. Many organizations use the Triple Bottom Line framework to evaluate their performance in this broader context and demonstrate their commitment to sustainability.

That just makes good business sense. When you broaden your performance measurements, you identify a broader range of risks and opportunities. You foster innovation and continuous improvement. You shine some light on behaviors and activities that have or could have negative impacts.

Triple Bottom Line Decision Making

So how do you improve the Triple Bottom Line value of your business? You use a Triple Bottom Line approach to decision making.

As you go through the Sustrana process you will learn how to do this. You will use a Triple Bottom Line framework to assess risks and opportunities, identify issues to work on, and set goals. Most importantly, you will learn how to align sustainability goals with your broader business objectives. That will lead people in your organization to incorporate Triple Bottom Line thinking into day-to-day decisions.

ESG

A slightly different way of looking at sustainability has evolved for businesses. It is a focus on environmental, social, and governance factors – or ESG. These are the categories of inquiry used by investors for screening and analyzing business sustainability when making investment decisions.

ESG omits the economic aspect of the Triple Bottom Line and adds the concept of governance, but is nonetheless very much aligned with triple bottom line analysis. Sustainable investment analysis does not ignore economic issues. It simply deals with economic issues as part of traditional financial investment analysis. Financial analysis happens along side of the sustainability analysis.

The addition of governance to sustainability analysis draws greater attention to how business decisions are made. This means taking a closer look at what controls and systems are in place to steer a business toward increased long-term value and a more sustainable future.

The Triple Bottom Line concept of economy looks at how governments, businesses, and individuals distribute money. The governance part of ESG includes a look at the structure and systems within which businesses operate and make monetary decisions. It goes beyond traditional financial models that are often narrowly focused on profits and shareholder return, and examines the impacts of financial decisions on individuals, the community, and the environment.

Governance through a sustainability lens helps a business define what kind of company it is or wants to be. It guides decisions about the distribution of revenue and considers how those decisions affect people and the environment. This does not mean that profits and shareholder return are ignored; they are just put in balance with other sustainability concerns and vision.

Sustainability economics

Economic sustainability relates to how an organization uses its economic power and what its direct impacts on, and responses to, economic conditions are. This involves the efficient, responsible, and purposeful use of resources, based on a clear understanding of economic systems and conditions, to ensure long-term stability and success.

Across the globe, a transition to a new economic model is occurring.

Global risks and drivers such as climate change, population growth, globalization, urbanization, and resource depletion are causing a profound shift in how stakeholders view value creation.

Increasingly, the value of a business is derived not only from physical and financial assets, but also from intangible assets (e.g., brand, human capital, and intellectual property) that are not fully captured on the balance sheet. A 2015 study of the S&P 500 equity index found that 84% of market value is currently represented by intangibles, compared to just 17% in 1975. To actively compete in today’s market, companies must fully develop and leverage their intangible assets.

Pricing the priceless

Efforts to use true cost accounting to quantify the value of environmental intangibles from ecosystem services and factor that value into economic equations have made steady progress over the past several decades. Many companies now internalize environmental costs that were ignored in the past. More investors appreciate and are expecting the full picture shown in a real cost balance sheet – one that includes formerly externalized environmental costs and benefits.

On the social and governance side of things, expectations are changing, too. Methods and tools are emerging to better manage, quantify the value of, and track the effects a company’s operations and supply chain have on communities. Beyond improving workforce relations, tools and practices such as human rights scorecards and supply chain engagement are becoming more established and common aspects of business management and reporting. Highly publicized corporate governance failures, such as Wells Fargo’s fake accounts and Volkswagen’s emissions cheating scandal, are elevating the importance of enhanced credibility and trust in the eyes of stakeholders.

As a result of these drivers and trends, investors, regulators, and the public are increasingly putting pressure on companies to integrate sustainability performance indicators into their strategies and processes. Organizations working to develop sustainable business models are poised to enter this new economy and seize emerging opportunities.

Company valuation and The 6 Capitals

There are many types of capital that make up a company’s overall value. Traditional financial value metrics such as net income, return on investment (ROI), and cash flow are based solely on standards issued by regulatory bodies such as the Financial Accounting Standard Board (FASB), and the International Accounting Standards Board (IASB). These mature accounting standards and practices provide a robust framework for managing, valuing, and reporting on tangible assets such as:

1. Financial Capital, (including all available funds, whether debt or equity), and
2. Manufactured Capital, (including material goods and infrastructure that are owned, leased, or controlled by the company).

Financial statements and market valuation have not historically taken social and environmental externalities into account. They do not provide a good mechanism for measuring intangibles. As a result, the full picture of a company’s value and level of risk is incomplete. Managing, valuing, and reporting on the following so-called non-financial or common capitals is becoming an increasingly important aspect of business strategy:

1. Intellectual Capital (including brand, reputation, research and development, the means of creating competitive advantage, and business processes),
2. Human Capital (including the direct and indirect workforce, made up of individual capabilities and skills to complete tasks and create intellectual property essential to business success, along with a willingness to continue using that ability for the bene t of the company),
3. Social/Relationship Capital (including stakeholders and business networks, the ability to conform with social norms and build trust and license to operate, with or without regulation), and
4. Natural Capital (including direct and indirect access to and use of environmental resources and ecosystem services such as food and nutrient cycles that include things like pollination and soil regeneration, raw materials for medicines and industry, clean air, and clean water).

Effectively managing and reporting on common capitals is a critical step in capturing the full value of a company and understanding risks and opportunities that may impact that value. Organizations such as the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) are working to help companies understand, evaluate, and report on common capitals, and the ESG issues they relate to, on par with the capitals that are governed by financial statements and accounting rules.

Optimal use of natural, human, and financial resources and the accumulation of capital stock help an organization be more successful and prosper over the long-term to achieve economic sustainability. These concepts extend beyond the important baseline of making sure that an organization is profitable. They involve taking into account environmental and social concerns about business activities. To evaluate economic sustainability, look at the impacts business activities have on the communities a company is part of, both geographically and in terms of the economic and governmental systems the company is connected to.

At a high level, an organization should evaluate whether its distribution of revenues among employees, management, shareholders, and the community supports a healthy, thriving business and business environment. Here are some questions to ask to determine an organization’s economic sustainability:

• Is the organization’s workforce (and that of its supply chain) paid a living wage and is there wage equality between classes of workers?
• Is the organization transparent about its financial health, ownership, investments, and advocacy?
• Does the organization understand and address community needs to ensure a vibrant business environment in which the organization is a valued and active member?
• Does the organization promote and support local economic development through community partnerships and hiring?
• Does the organization find solutions to reduce pollution rather than pay fees to pollute?
• Does your activity create a benefit for your company, but at the same time result in a cost or burden that falls on society?

You will find many of these topics in Governance, where management topics are covered, or in Social and Environmental, where the impacts of business decisions are realized. By considering economic impacts, your organization can improve its likelihood of sustaining over a longer period of time. Attention to these considerations will also increase community support and investment in the continued operation of the business.

The value of sustainability management systems

Companies need decision-making tools to better manage the common capitals, not just in terms of improving the bottom line (reduced costs and risks), but also at the top-line (revenue growth and increased brand value). The business case for effectively managing common capital assets is strong.

Sustainability best practices are the best tools available today for managing the common capitals and assessing the long-term, holistic valuation of a company. Sustainability management is a process for identifying risks and opportunities within the systems in which a company operates. This is a critical perspective for managing in contexts where a company is not in direct control of capitals that make up its overall value. For example, reputation can be damaged because of an event in the company’s supply chain. Highly skilled employees can quit and move to a competitor. Access to natural resources can erode because of increasing scarcity, climate change impacts, or civil unrest.

By strategically integrating sustainability management into their corporate DNA, organizations gain a fuller understanding of the complex risks and opportunities they face. This protects and enhances company value. It helps organizations more effectively allocate their various sources of capital, improving their chances of success – and survival.

Towards a sustainable economy

The interconnected and complex challenges facing society require systemic solutions. A growing number of businesses recognize that social and environmental risks are detrimental to the bottom line, and that addressing them can also uncover business opportunities to innovate and enter new markets. These forward-looking companies are integrating key sustainability concepts such as the triple bottom line, systems thinking, and ESG aspects into decision-making, product development, and operations.

Action on the part of individual companies is a good start, but to meet the challenges that lie ahead businesses will need to play a larger role in creating solutions. This will require a better understanding of how these challenges will affect their business and society. They will need to reinvent and redirect to models like the circular economy.

Organizations will need to break down silos, work in cross-functional teams, and look into supply chains to create solutions that address complex, systemic problems. To be more impactful in the next decade, they will also need to innovate through collaborative partnerships with other businesses, academia, civic organizations, and key stakeholders.

The UN Sustainable Development Goals are a good starting point for businesses to identify ways to contribute and shape solutions. The SDGs are 17 ambitious goals underpinned by 169 targets that set priorities for sustainable development through 2030. These goals reflect global consensus on the sustainability agenda and can act as a powerful indicator of future action that will impact and motivate businesses. They provide a comprehensive framework to create a more secure, equitable, and sustainable world.

Macro drivers

There are three primary, broad-based economic, environmental, and social circumstances – what we call macro drivers – that are forcing post-Industrial Revolution global change and support using sustainability as a business management tool. They can be grouped together in three main categories.

1 – Growth in Consumption

We are experiencing increased consumption from a growing world population with an ever-larger middle class. There are 7.28 billion people on the planet right now. It’s projected that we will grow to 9.6 billion by 2050 and more than 10 billion by 2100. The global middle class will triple by 2030. The exponential growth of the population means that demand will exceed supply and begin to eat away at our stock of resources. There will be a greater demand on everything from energy to food and water.

Research from the Global Footprint Network shows that we are already exceeding the Earth’s capacity to replenish resources and absorb waste by 50%.

That means we consume and create waste at the rate of 1.5 planets. Given projected population growth and increases in consumption, we will need the equivalent of almost three planets by 2050. Without changes, we are on a path that will make it impossible for future generations to survive.

What might that look like? Here’s the basic idea:

2 – Climate Change

Climate change refers to changing global weather and temperature patterns brought about by an overabundance of greenhouse gasses in the atmosphere. Climate change is not new. In fact, the Earth’s climate has been changing since its formation. What makes climate change a significant sustainability issue is the fast rate and degree to which our climate has been changing around the world in recent decades.

Given the complexity of this major driver, and its significant impact on all aspects of business, it stands as an important issue for businesses to work on. You can expand your understanding of this issue by reading the climate change education.

3 – Human Well-Being

There is increased focus on human well-being because the other macro-drivers discussed above are creating a “perfect storm” that has serious implications for human health and well-being. If these trends are not slowed and reversed, maintaining social and political stability will become increasingly difficult. Climate change is expected to hit the world’s poorest populations the hardest. These are also the people who have contributed least to the problem.

While significant increases in quality of life for many people have taken place over the last century, there is still much work to be done. On a global scale:

• 1.75 billion people lack access to electricity
• 884 million people do not have access to safe drinking water
• 13.6 million people are undernourished
• 1.12 billion adults cannot read or write
• 420 million people are classified as unemployed

At a fundamental level, the following provide benefits to human health and well-being:

Why is it important to understand these macro drivers behind sustainability?

Current trends related to these three macro drivers are creating pressures on the environment, society, and the economy. Consumption of natural resources and carbon emissions threaten the capacity to sustain human and economic activity. At the same time, unemployment and social inequality threaten to erode the stability of businesses and society.

Long-term business success depends on a thriving society. Companies rely on productive, actively engaged employees. They need healthy, happy customers to purchase their goods and services. Corporate governance and financial system instability and failures undermine trust on the part of civil society. Stakeholders have elevated expectations around the role of the company in society. Business leaders are grappling with these pressures and the underlying factors that are driving global change.

Companies that understand global macro-drivers and plan for a changing world will be the market leaders when traditional business practices are no longer workable. When you build your business case for sustainability, you will drill down on the company drivers that make sustainability relevant for you. It’s a good bet that global forces will affect your company directly or indirectly. By understanding these global forces you can anticipate both direct and indirect impacts on your company.

For example, despite the threat of climate change, most US companies are not required by law to measure and decrease their carbon emissions. However, US companies are sometimes driven to meet requirements of foreign customers and business partners. You may be asked to do the same if you are in the supply chain of one of these companies. Being able to understand global forces will help you anticipate and better identify sustainability risks and opportunities.

Business drivers

In addition to the global mega-trends that are influencing change toward sustainability, there are several global business trends driving businesses to adopt more sustainable business practices. They can be grouped together in three main categories.

1 – Globalization

Globalization means that the world is getting smaller. Advances in communication and technology, including the Internet revolution, allow people to dynamically share ideas and worldviews. This has become a vital tool for businesses, leading to greater collaboration and opening of new markets. It also means there is increasing interconnection, demand, and competition in the global marketplace, with more uniform expectations about business behavior, products, and services.

The phenomenon of globalization is not new, but the rise of the digital information age enables more people than ever before to engage in global markets. Since the late 19th century, advancements in transportation and communications infrastructure has increasingly allowed people of different countries, languages, and educational backgrounds to communicate, compete, and share information.

Globalization blurs national and cultural boundaries and influences the development of global social norms. As a result, the connectedness of the world’s economies and cultures has grown very quickly.

2 – Increased Interdependency

In recent years, companies have increasingly outsourced non-core functions. The practice of outsourcing these functions to the open market (be it local or global) grew out of the idea that the market will self-regulate to deliver a product at the lowest cost. This proved true, but what we’ve discovered is that the market can and will do this by increasing the cost to society in the form of planetary degradation, unfair wages, and unsafe work environments. This has given rise to reputation risks that associate a brand with the means by which its cost of production is lowered.

Outsourcing has also changed the dynamics of the business world by increasing interdependence. Companies have much larger networks of suppliers and business partners. It used to be that our largest businesses had several hundred partners and suppliers, now they have thousands. The greater the number of outside organizations upon which a company relies, the more difficult it is to manage the risks associated with shifting the burden on lower costs of production onto society.

Businesses today are inextricably linked to the reputations of their suppliers. As a result, businesses have an interest in the degree to which suppliers manage environmental, social, and governance (ESG) risks. Many companies in the supply chain of other companies are now being asked to report on their sustainability practices and performance.

Increasingly companies are managing social and environmental risks in their supply chain, as shown below.

3 – Increased Demand for Sustainability

In recent years, public demand for transparency about a business’s social, environmental, and governance (ESG) activities has increased. For some, sustainability is a factor when deciding what to buy, how to invest, and where to work. Many people now believe that business should play an active role in taking care of people and the planet by supporting larger social and environmental causes.

Customers expect companies to address and communicate about global issues like climate change and human rights, as well as local issues based on an assessment of community needs. Investors expect companies to manage sustainability risks and opportunities. Employees want to engage in meaningful work. For younger generations in particular, social and environmental considerations play an increasingly prominent role when making career decisions.

These expectations for business from workers, customers, and investors have never been higher. This is reflected in consumer perspectives:

The expansion of sustainable investment and screening for ESG factors is happening throughout the business world. According to the US SIF Foundation, from 1995 – 2014 there was a 929% increase in requests for ESG data in the U.S. This represents a compound annual growth rate of 13.1 percent.

These shifts in customer, consumer, and investor expectations, together with the mega-trends discussed in the last section, are creating increased demand for ESG data. Larger companies are pushing into their supply chains for more information and transparency. More companies are integrating sustainability into their operations, and then sharing the results in public sustainability reports. Companies that don’t have a public-facing sustainability strategy face the following risks:

• reputation degradation
• reduced access to credit markets
• loss of customers and reduced access to new markets

Adoption trends

Sustainability adoption trends are responsive to the macro drivers and business drivers. The growing complexity of the global marketplace, increasing pressure on natural resources, and shifting expectations are bringing about changes to business-as-usual. In response to the global drivers of sustainability, a growing number of companies are adopting sustainable business practices.

Delivery of products and services (and all that entails) will change due to the influence of such forces. The opportunities are there for those who understand that sustainability is a large part of the solution to our global challenges.

Companies are realizing opportunities for leaning into the sustainability challenge, rather than avoiding it. To remain competitive, companies need to be able to adapt to new demands from the markets and societies within which they operate.

How are companies responding to the mega trends and drivers of sustainability?

In recent years, more and more organizations are prioritizing sustainability by adding it to the permanent business agenda, establishing sustainability programs, and reporting on their efforts.

Based on a study of 490 companies in various sectors, 80% of global executives say that sustainable business practices are either central to overall strategy or an increasing priority, as shown below.

Despite economic challenges, many CEOs see business opportunities in taking a leadership position on sustainability. According to a 2013 UN Global Compact-Accenture survey of global executives:

• 93% say sustainability is important to the future success of their company
• 80% consider sustainability as a route to competitive advantage in their industry
• 76% believe embedding sustainability will drive revenue growth and new opportunities in the future.

Increasingly, companies are publishing sustainability reports that demonstrate their social and environmental responsibility. According to a study from the Governance and Accountability Institute, 81% of the S&P 500 companies report on sustainability. The graph below shows the growth in sustainability reporting as an indicator of recent sustainability adoption trends.

What does business sustainability look like?

Sustainability management involves the simultaneous pursuit of economic prosperity, environmental stewardship, and social responsibility. By considering a broader range of social and environmental impacts and a longer time horizon in decision-making, companies can ensure the future viability and resilience of the organization. When approached strategically, this leads to enhanced company profitability, value, and long-term stability.

Companies that have strategic approaches to sustainability better realize their potential for new customer acquisition, increased market share, and competitive advantage.

The upshot

Sustainability as a business management practice provides powerful tools for change. It has evolved out of growing awareness about how the negative social, environmental, and economic impacts of industrialization and macro drivers affect business viability.

Leaders in business sustainability are generating creative and innovative solutions to help us toward the goal of living within Earth’s limits while providing a decent quality of life.

Welcome aboard this growing business community.

Resources

• Sustainability’s deepening imprint

Sustainable thinking

Sustainable thinking offers a new perspective for understanding the world as a complex, interconnected system. It’s about recognizing when and the extent to which existing ways of thinking and doing business have become obsolete or even threatening to the viability of an organization. This moves away from the linear “take-make-waste” mindset and towards a circular “borrow-use-return” mindset that allows for innovative ways of solving complex, systemic problems.

Humankind has made incredible progress since the time of the Industrial Revolution, but the growth and advancement of civilization has also produced unintended consequences. Getting on a sustainable path means changing how we think about and orient our societies.

Business and industry – the most powerful and influential forces on the planet – have the ability to bring about organizational change that can catalyze broader societal change. Once organizations understand their harmful impacts, they can then begin to shift their thinking and work towards increasing environmental health, social wellbeing, and long-term economic prosperity.

A journey & destination

Sustainability management excels when it’s strategic. And it becomes more strategic when you think of sustainability as both a journey and a destination. Strategic sustainability management is about crafting the journey steps you take with the vision and purpose of a destination: a sustainable organization.

It’s about getting from point A to Z, with the intention of creating change beyond your individual actions. It is more than just experiencing events and circumstances along the way. It is about using those experiences to develop the organizational willpower to journey on and create a sustainable organization.

When you think about sustainability this way, your programming can be both practical and visionary. When you pay adequate attention to the process of managing a sustainability program, you are being strategic.

Why is it important to consider both the journey and the destination?

The route to sustainability can run into roadblocks and reveal problems that lead to detours along the way. That’s why it’s so important to build a strategy, an end game, and create a plan so that your journey is progressive and purposeful.

Without overarching sustainability goals and a vision of what the organization will look like when it is sustainable, you can wander aimlessly from project to project. To paraphrase Alice in Wonderland’s Cheshire cat, when you don’t know where you are going, any path will do. Without knowing where you are going, you can waste a lot of time and fail to achieve the most meaningful results possible.

What is your vision? What goals will translate your vision into reality? What activities will support those goals or remove barriers to achieving them? With goals and a vision, you can purposefully choose and evaluate your activities. You can measure progress not only by each activity’s intrinsic value, but also by how each activity moves the organization toward the larger vision. You put yourself on a journey with a destination.

When roadblocks emerge, you’ll still have a destination. You can better motivate removal of roadblocks or detours around them by spotlighting your destination: a valued, larger vision of the organization’s desire. Use your vision and goals to inspire creativity and innovation, rather than defeatism, so you can navigate the bumps in the road and allow your journey to continue.

Organizations do not become sustainable without knowledge, vision, and a plan. It is a process that takes time. You cannot destroy a profitable, but unsustainable, business in the process. The journey itself must be purposefully used to transform the organization into a profitable, sustainable business. Each hard won accomplishment is like a milestone that you can use to explain how it fits in and leads toward strategic goals. If you keep at it, your journey will bring you to a sustainable destination.