Last week, GreenBiz.com released their annual State of Green Business report. The annual report details the top 10 trends in sustainability for 2014, along with a new metric, the Natural Capital Leaders Index. This Index, developed by Trucost, examines how some 500 U.S. businesses are performing on a variety of sustainability indicators.
The report, which calls out chemical transparency, collaboration, water risk, monetization of environmental impacts (aka shadow pricing), food sustainability, and energy storage, along with the engagement of corporations, cities, communities, and employees as top trends, finds that while we still have a long way to go, we’re making some important and positive impacts.
Here’s what we see trending in corporate sustainability this year:
A Sense of Urgency
The effect of severe and disruptive weather events, increased assurance (and evidence) about the realities of climate change, the sensitivity of media to social and environmental impacts, and the real threat of resource scarcity is creating a growing sense of urgency for companies. Environmental performance is becoming embedded the DNA of most large corporations—many of whom have been managing their environmental and social risks for years—and is beginning to trickle down to small-and-medium enterprises (SMEs) as well.
What that means: Our experience, and the data available from Trucost, demonstrates that engagement on sustainability has steadily increased over the past decade, and will continue to do so. SMEs who are not yet addressing their environmental performance should get on board now in order to manage not only their own impacts, but in anticipate of expectations from buyers, suppliers, business partners, trade associations, and others.
Maturation of the Market
There are few, if any, large corporations that aren’t addressing responsibility in their owned & operated facilities and supply chain. The specifics, like climate change, aren’t a debate in corporate America; these organizations see the value in running efficient operations in which environmental risks have a seat at the table. You can see the maturation of the market as it relates to carbon management: the largest companies in the world are the ones driving CDP’s Climate Change and Supply Chain reporting programs and the EPA’s Green Power Partnership program. They’re also the ones for whom the purchase of renewable energy credits (RECs) has become standard business practice.
That means that progressive companies are looking toward the horizon to see what new environmental performance opportunities they can capitalize on. Emerging strategies include: the shadow pricing noted by GreenBiz, where companies like Microsoft are charging internally for environmental impacts; the use of power purchase agreements by companies to hedge the rising cost of energy; the exploration of new products and services that reduce impact as key business lines; and a continuing deep dive into the nuances of the supply chain.
Supply chain impacts are a good example of how companies are widely adopting sustainability. It’s no longer seen as progressive to be a responsible organization looking at the impact of your supply chain; the assumption is that everyone is doing it because it’s the normal way we do business.
Given the volume of environmental impact that occurs in the supply chain, it’s not surprising that so many industry efforts are now focused there. Increasingly, companies are requesting (and some requiring) that their suppliers participate in their sustainability efforts. Tools like the Higg Index, SAP’s Sustainability Performance Management software, and more are designed to measure impacts within the supply chain, with a focus on ease of use, hurdle reduction, and accountability.
The Higg Index is an outstanding example of the movement toward harmonization occurring in the market. Companies are beginning to understand that a stand-alone approach toward sustainability doesn’t work, and is, in truth, antithetical to the idea of an interconnected, sustained world. As a result, more and more organizations are coming together at a pre-competitive, collaborative level to develop tools, processes, and systems that benefit the whole.
This harmony is driven, in part, by an emerging emphasis on industry-level specificity in sustainability programs and reporting. GRI’s redefinition of materiality, The Sustainability Consortium’s role in developing key sustainability performance indicators, the Global Social Compliance Programme’s reference guides, and tools like the Higg Index taking a deeper dive into specific industries have netted overall wins for sustainability implementation and reporting.
An important benefit of this harmonization is that it’s making sustainability easier. Consider your average apparel supplier, who is audited dozens of times annually on social, labor, and environmental compliance. Under the auspices of a tool like the Higg Index, each supplier maintains one set of metrics that can be accessed by all its buyers simultaneously, standardizing sustainability metrics, reducing survey fatigue, and improving participation.
This collaborative attitude isn’t limited to retailers; consider Microsoft’s recent alignment with Keechi wind farm, a relationship developed with the involvement of project partners RES Americas and Enbridge, Inc. The software giant will purchase all of the wind farm’s clean energy over a 20 year period through a relationship known as a power purchase agreement. In this particular example, everybody wins: Microsoft gets renewable energy (not to mention good PR), Keechi gets critical funding, and RES Americas and Enbridge, Inc. profit as the project constructor and financier.
What’s true i
n 2014 is that sustainability isn’t a nice-to-have or nice-to-do anymore; it’s become the clear way that companies are operating now and into the future. Increasingly, organizations that haven’t jumped on the sustainability bandwagon will find themselves falling farther behind the responsibility curve. And as sustainable companies continue to realize bottom line savings, stronger stock performance, and higher rates of stakeholder engagement than their non-sustainable peers, the message for SMEs becomes increasingly clear: the time is now.
Not sure where to begin? We’d be happy to help you get started in sustainability. Contact us today.