When considering the competitive advantages of sustainability in business, it is important not only to consider the external benefits to people and their environments but critically the internal advantages that repositioning the business in terms of efficiency, brand development and future-fit resilience can bring. Key questions that need to be asked and carefully considered in terms of sustainability and business competitive advantage are:
It is wrong to demand that sustainability initiatives are always cheaper than existing ways of working. This can be true in cases where the switch to renewable energy, locally sourced or alternative materials bring a quick return on the investment. Businesses are adjusting or repositioning their operations in advance of future cost rise, changes in consumer opinion, or forthcoming legislation. It is pointless to wish for cheaper raw materials if they can no longer be sourced cheaply, are not in favour with consumers and will be outlawed soon! Sustainability initiatives must always be considered against the business not being in the marketplace at all, losing out to competitors or being behind customer preferences for a specific attribute (i.e., dolphin-friendly, not sourced from rainforests, responsibly produced), rather than on basic economic investment terms. That new gas boiler may be a more efficient means of supplying power and energy to your plant, but if regulations are likely to demand that it is phased out by 2035, 15 years into its expected asset life of 25 years, is it still the answer?
Here are 6 sustainability parameters to review any proposed initiatives against and gauge the extent of any competitive advantage for the business.
The is an increasing body of sustainability-related legislation coming over the legal horizon and into the business world. Businesses and organisational leaders need to constantly scan ahead through megatrend analysis or PESTLE exercises for upcoming legislation, regulations or even within international protocols that will influence existing markets, processes or consumer choice. To be warned is to be forearmed, as you will have longer to debate the actions needed, whether specific markets need to be exited and how you will position yourself within any post-legislative marketplace. Key issues business competitive issues to consider are waste and packaging, ESG governance rankings and the risk of stranded assets
The Paris Agreement conventions held every few years to support international drives towards limiting global warming, are increasingly having an influential impact on national carbon emission laws and are increasingly being linked to urban air quality.
Most organisations have effective enterprise risk management (ERM) systems for the identification of conventional (tangible) business risks, where they often do not identify emerging or new environmental risks and trends, changes in societal norms or switches in consumer choice (intangible risks). A significant part of our training and coaching exercises nowadays in Leading Green are fostered around impact assessment and the alignment of organisational activities with business sustainability priorities. This involves building simple communication routes and trust between a business’s risk experts and their Environment & Social professionals and developing an understanding between two organisational silos with different risk cultures.
Businesses and their management teams, through day-to-day workloads and organisational pressures, have become too reliant on what they think they know about their business or marketplace sector. If untested this can lead to significant corporate bias, groupthink and blind spots covering new trends or market entrants. Even those with over 60% market dominance or who are regarded as unassailable market leaders can find their revenues disappearing and their products regarded as obsolete within a noticeably short time. Case studies as Kodak’s failure to recognise the attraction of digital photography, the lack of insight into how recordable music would destroy Philip’s record disc manufacturing capability, or Blackberry not spotting the risk that Apple’s iPhones represented are all classic examples. As we experience repeatedly, the recognition of business risk is biased toward the selection of risks that that organisation is aware of, recognises or is prepared to act on.
Organisations with mature sustainability systems aligned to their business planning cycles now understand the linkages between sustainability and business risk. The World Economic Forum published an annual list of current and emerging risks, and since 2018 the primary risk warnings have not been on economic or geopolitical issues but environmental and social governance aspects. This explains the growing interest within investors and financial institutions in looking ahead towards bio-physical and socio-geographic risks and then bringing their findings back into an examination of those industries at greatest risk, and the financial consequences for investors.
In modern businesses, sustainability is not a new element for business, but rather a new way of looking at risk and operational performance. Its business competitive advantage for organisations is that few businesses have woken up to this reality.
Speaking with investors and customers with their experience of other companies, asking employees about sustainability risks facing the organisation and opening dialogue with communities affected by the business takes time and commitment. It also yields valuable intelligence that can be assessed and analysed by organisational leaders. It is a valuable business activity to regularly set aside time to explore how your brand or corporate persona stacks up against your competitors, world events, and changing patterns of consumer loyalty.
In Leading Green, we have a unique programme entitled ‘Thinking Outside the Boss. It is radical, innovative and ultimately of great value to business leaders as it challenges individuals across the organisation to identify new efficiencies, exploit new opportunities and for the most innovative employees – how they would kill the company if they were competitors!
It’s worth it to direct conversations around sustainability issues from parties associated with your business. The value of their unaligned perspectives, their awareness of new trends in the marketplace or even age group preferences can be re-assessed for competitive market advantages, branding opportunities, and the development of responsible management actions that are welcomed both internally and externally.
What is a term drawn from the worlds of accounting and legal practice doing within the concept of sustainability and in what manner can it help competitive business advantage? The term ‘materiality’ purely relates to what is relevant and important to the business and repeats the focus we have placed in other blogs on prioritising business activities through a sustainability lens.
Sustainability Materiality is a business-critical method that strengths the organisations key CSR or sustainability management systems by highlighting that the business has assessed, analysed and prioritised the social and environmental risks through the materials (end their supply chains) that you rely on.
In terms of competitive advantage, what types of sustainability issues are likely to be of material interest for the business?
From a competitive strategy point of view, the primary goal is to prioritize immediate actions that are within the organisation’s control and can be acted on rapidly. Representation within a business strategy matrix format is a good way of separating out risks to prioritise.
Environmentally inclusive design (EID) is a critical part primarily in the development of new infrastructure and assets within the external environment. Normally a part of the impact assessment process, EID adopts a more sustainable format by helping developers, architects, construction and design teams remove from the stator or regulatory considerations likely and adverse negative aspects of environmental or social contention. Thus, improving the likely acceptance and consent to build of a new utility structure, development or infrastructure project.
It is a structured assessment of the proposed design of the project, the receiving environment, and its integration within the landscape, with further adaptation to increase community acceptance. It is a pro-active sustainability approach that examines the trade-offs between a site-based development and the environment, examining how the design, positioning, process elements, operational activities, resource inputs and community relationships can be enhanced through the application of sustainable development design actions.
The approach is attracting increased attention within the utilities as they reposition and redevelop necessary infrastructure, land developers, the green buildings movement, and in delaying the delivery time of large critical national infrastructure. It has become increasingly important as its results feedback directly into the ESG criteria for investors looking for ‘do no harm’ safeguards within their portfolios.
Single-use plastics (SUP) are of increasing concern amongst consumers and regulators as the world annually produces over 300 million tonnes of plastic materials, around 50% of which is SUP. You would have to little business empathy not to have picked the trend to phase out unnecessary plastics use. As a social trend it is pressing many businesses to re-assess their packaging, manufacturing and product lines with a view to eliminating end of life plastic waste disposal and content.
Countries (such as India) are moving to ban or phase out the use of SUP, as the entire plastic waste stream places considerable pressure on national and business waste management systems, as well as our cities, water systems, oceans, and specific vulnerable communities across the globe. IN order to meet consumer concerns, whilst still supplying safe products or packaging, many organisations will be forced to innovate, redesign their products, rethink the role of plastic in their processes, and source more sustainable alternatives.
Competitive advantage will lie in how a business acts and how it is perceived to act. Does it change reluctantly after all others have changed their outlook on SUP, or are they seen as a leader within their sector that helps influence the customer’s mindset, positioning themselves as a responsible brand as people begin to recognise and act on the risk of SUP?
This is a growing concept and disruptive marketplace alternative in business, revolving around the idea that an organisation no longer just sells you the product that you wish, but instead sells you the service and outcomes that the product normally provides.
You may have noticed that car ownership is no longer important for a growing proportion of drivers, instead, they have bought into the concept of cars as a service, agreeing to enter contracts with car manufacturers through which they effectively lease a vehicle for several years before returning it.
Products as services is gaining increased interest amongst manufacturers as it provides new routes through which customers are still affiliated with the organisation, products enter the market, but valuable or scarce materials stay as ‘assets’ of the business, and as a springboard through which other desired services can be selected by the customer. In the case of the car manufacturers, the customer stays loyal to the brand and has the satisfaction of a new vehicle every three to four years without having to raise the capital, they are released from the responsibilities of owning and servicing the car and have no risk of losing the financial investment through depreciation. The customer may also be tempted to buy other value-added products which increase their association, but usually at a premium price. For the manufacturer, there is the added value that the recyclability of the vehicle becomes a critical part of their manufacturing process. The concept of products as services fits in well with the wider political and industrial theory of creating a circular economy in which materials are constantly circulated within the closed system of a nation’s manufacturing industries, giving rise to reduced waste, energy loss and redundancy.
The competitive advantage of the product as a service business model is that it allows for a close association between the ethos of sustainability and a new interpretation of the value to a customer being provided by an enterprise.
In business, you are faced with the constant challenge of keeping your organisation in midstream or ideally ahead of the fleet. It is a constant challenge to renew, support and re-invent what makes your organisation, its services or products different. Sustainability I am a valuable tool that lets you aggress common business issues from a different perspective. A perspective that takes in the needs of today, tomorrow and valuable insights into how your customers view the world around them.
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