The evolution of sustainability (also known as CSR – Corporate Social Responsibility) within companies has not been without challenges. Different management theories, the quarterly pressures that all businesses face to make bottom-line numbers, and the need to make solid business cases have been areas of concern over the last decade. For a company to make progress in the area of sustainability, several key areas need be addressed:
#1 – Moving Sustainability from Just the Corporate Level and Operationalizing It through the Company – Social responsibility has been promoted from its early days focusing on areas such as philanthropy and giving back to the community. The proponents of CSR have existed for a while, but what actually started moving things forward is when the CSR efforts of companies moved from the corporate office to each operational unit. For example, in many businesses, supply chain management currently has teams set up around environmental compliance, green design, labor standards, and other sustainability efforts. Teams need to be embedded within the functional organizations and include experts from individual disciplines who have the passion to see sustainability successfully implemented. Internal change management practices are critical at this stage to ensure short-term wins and to develop an advocacy group that grows within the organization.
#2 – Creating the Tools and Processes Necessary to Track, Collect, and Drive – Initially tools did not exist to implement sustainability. Originally, the first tools were built around compliance programs. After, these tools and databases were combined with improved processes to help with green design. The efforts continue today by balancing the need to meet industry standards but also push the envelope from what already exists in the market. Processes need to change to include sustainability principles at the level and importance of other operational performance criteria, and there is a need to continually create systems and processes that track and move sustainability priorities forward.
#3 – Ensuring the Finances Are Allocated – Funding for sustainability operationalization did not initially exist beyond corporate philanthropy. Individual teams within supply chain operations and engineering at first had to create budgets and make business cases for specific projects (such as EU ROHS compliance). Eventually, these teams were expanded to take on environmental and sustainability programs and have stayed as a core function embedded within the functional groups. It is critical to ensure sustainability programs are funded as part of the overall operation costs.
#4 – Look for Win/Win Projects (Profit & Society) with Positive Business ROI – This is a key part of any sustainability program. The ability to define projects, articulate the ROI (Return on Investment) effectively to the key operational management of the company, and look for initial projects with very clear win/wins (society and business). This mindset helped gain additional traction within the operational groups on sustainability projects. Once businesses see that leadership in these areas drives good business return and even innovation, other projects are easier to fund. Leveraging industry partners is a great way ensure that key sustainability programs such as supplier audits and carbon reporting are implemented across the industry. Also, supply chain management teams are now starting to score suppliers on the quality of their sustainability reporting and their ability to meet corporate targets and implementation dates on sustainability programs. Later in the evolution factor of embedding sustainability, specific criteria was added within supplier business reviews to measure sustainability performance. Steps need to be taken to move sustainability measurement into both the quality and production functional groups and within the supplier scorecards/company metrics to closely embed it within the operations to make the greatest impact.
#5 – Bottoms up Grass-Roots Efforts and Top Down Support Are Both Needed – Initial grass-roots efforts have been key within the sustainability journey. Some of these efforts helped spur the focus of senior management attention and the need for additional sustainability investments even during past financially challenging periods. In addition to grass-roots efforts, key executive level support is needed to drive the actions and funding required to create sustainability teams for compliance, green design, and other sustainability-related activities. Overtime sustainability will start to focus more on innovation and less on just compliance.
#6 – Don’t Be Afraid to Try and Fail and Try Again and Again and Again – Theodore Levitt (The Economist, 2010), once observed that “sustained success is largely a matter of regularly focusing on the right things and making a lot of uncelebrated little improvements every day.” The sustainability journey has mostly been about continued and sustained sustainability engagement within operations. Projects need be constantly looked at, evaluated, and consistently implemented. This is a key reason for the success of sustainability. Employees at every level need to be empowered, supported and encouraged by management, and embedded operational team members need to do the hard work day in and day out. Not everything is perfect, and sustainability still has a long way to go within companies, but it should focus on continuing to pursue its long-term sustainability goals (the balancing and care of people, planet, AND profit) and push towards innovation as well.
#7 – Embedded Sustainability Is the Key – There is much talk nowadays about sustainability especially from the PR departments of companies. To make real progress in sustainability (defined as balancing the needs of the 3 P’s: Planet, People, and Profit), a company must embed it into its everyday operations and within it’s DNA. Otherwise, it becomes only a marketing promotion, and it is not part of the core of the company. Every worker must embrace sustainability, and it should be within every function and operation of your business (from audits to supplier award selection, to product design, to treating ALL stakeholders fairly). The great thing about being a small or medium size business is that you can embed sustainable practice from the start, which can be seen in the latest Certified B Corporation guidelines. Large MNEs (Multinationals) will have a harder time ensuring every function is on board with sustainability; especially the finance department. With time, more research will be published proving the link between doing good and being a more profitable firm.
#8 – A Change from Compliance to Collaboration Is Needed – Missing in most sustainability programs is the urgency to move towards an innovative collaborative program with the business functions and with the supply chain. Compliance and policing programs only work superficially and do not generate the game changing innovation that will come from a sustainability program that reinvents products, aligns technology with solutions, and co-creates programs of sustainability with suppliers. This type of innovation is what Steve Case points to in his book entitled The Third Wave. Innovation that truly impacts the lives of people in a positive and sustainable way.
Future Prospects of Sustainability
A company’s future sustainability vision is to drive for increasing transparency around the supply chain, to integrate sustainability practices into its operations, and move to a systems approach to ensure that it is embedded into the DNA of its employees, processes, and the companies within its supply chain. Building supplier capability in sustainability needs to be driven by companies, as well as working closely with industry bodies and partners to ensure the entire supply chain is practicing sustainability at a level of transparency required. The supply chain sustainability strategy looks at People, Planet, and Profit across both products and supplier management. In driving this transparency, companies can increasingly look for ways to lead in sustainability but at the same time drive improvements and positive changes in industry standards.
As sustainability continues to evolve, employees should be encouraged to make it part of their everyday work. As suppliers also start to get engaged, many possibilities exist on how to further evolve sustainability to a new stage of development beyond the traditional CSR path. This new stage will move beyond the walls of the company. It will be tied closely with the suppliers as the companies collaborate with each other to develop ethically responsible operations, utilizing partners and peers, standards bodies, the government, and other industry groups to drive change, and at the same time advance sustainability as a positive way forward. This positive advancement is the challenge and the hope of evolving sustainability programs within companies and within their supply chains and value chains as they dream beyond just competitive advantage and public image and become sustainability leaders and world changers for the good of society.
Payson Johnston is the CEO & Founder of Crowdz, a Silicon Valley startup focused on helping sellers overcome high ecommerce fees by enabling alternative sales channels and lowering the seller’s risk. In addition, Payson has 20+ years of experience in the supply chain industry and has taught on the topics of sustainability, ethics, and supply chains at the UC Berkeley extension and the University of San Francisco.
The content for this post was adapted from a paper published in the Journal of Management and Sustainability, Vol 6, No 2, 2016 under the title “The Evolution of Sustainability in a Global Firm and Its Supply Chain.” The paper was co-authored by Robert Mefford and Payson Johnston from the School of Management, University of San Francisco.