During the research and interview period, we focused on identifying common best practices and behaviours of the study companies and found that the New Sustainability Champions exhibit three broad sets of characteristics. They:
- Proactively turn constraints into opportunities through innovation
- Embed sustainability in their company culture
- Actively shape their business environments
Each category comprises specific behaviours and merits a closer look.
3.1 From Constraint to Opportunity
New Sustainability Champions proactively turn constraints into opportunities through innovation. Their approach involves pragmatic adaptation of existing technologies and delivery mechanisms. They eschew expensive research into new technologies to make current products cheaper, more widely available or better suited to local production processes. The Champions stand out for their ability to turn constraints in delivery channels into opportunities. For instance, they may identify alternative production methods to get products to market more directly.
To innovate effectively, New Sustainability Champions focus attention on these key points:
They address lack of resources.
One response to a current or future shortage of a particular resource is to find ways to reduce the amount used. While this often makes sense from an efficiency viewpoint, it also increases the longevity of the business by preserving a critical resource. Importantly, Champions recognize that the reductions need not be limited to their operations but can, and should, apply to their suppliers and users.
Two noteworthy examples of Champions successfully addressing resource shortages are Shree Cement, an Indian cement producer, and Manila Water, a water utility in the Philippines.
Faced with limited access to low-cost energy, Shree Cement developed the world’s most energy-efficient process for making its products. The company has become the global benchmark: leading cement companies from around the world visit Shree to learn from its innovations. For its part, Manila Water drove down its levels of non-revenue water (NRW – water that does not reach the customer due to leaks or illegal tapping) from 63% in 1997 to 12% at the end of 2010. This was achieved partly by providing affordable supply to low-income areas, which turned probable NRW perpetrators into partners who now help prevent illegal tapping.
Another way in which New Sustainability Champions turn resource constraints into opportunities is by exploiting the by-products of other companies’ outputs or processes. China offers two illustrations of this approach. For instance, Broad Group, a large producer of air chillers, uses alternative energy sources such as waste heat from buildings to power its range of non-electric air-conditioning units. This accommodates a key constraint in China: many people still live “off-grid” in China, and for those who do use electricity, grid supplies are not always reliable.
Zhangzidao Fishery Group is another example. The company practices integrated multi-trophic aquaculture (IMTA), a more sustainable form of biodiverse fish farming that uses the waste of one species to feed another. IMTA aquaculture techniques allow Zhangzidao to increase production and economic diversification while reducing waste by converting by-products and uneaten fish feed into harvestable crops, reducing the need to introduce artificial feeds into the system.
They educate their customers.
A new product or service, no matter how well conceived, cannot succeed unless consumers are convinced of its benefits for them. Lack of knowledge and limited awareness constitute barriers to adoption that the New Sustainability Champions must work hard to circumvent, often in creative ways. For example, Jain Irrigation uses dance and song to explain the benefits of drip irrigation to local communities. With this innovative way of marketing, the company can convince and educate potential customers about its products. Not only does this approach help Jain to sell successfully, but it helps the company work collaboratively with local communities to improve its services and products.
They provide customers with appropriate financing.
Another major constraint is a lack of financial assets with which to make necessary capital investments, even when positive returns are expected in the long run. This is particularly true of the rural poor in emerging economies, where banks have limited presence. Kenya’s Equity Bank uses mobile phone technology to enable it to reach small farmers in rural Kenya, something that branch-based banking cannot do economically. Equity Bank partnered with Safaricom, leveraging the Kenyan mobile- services provider’s M-Pesa financial services platform to launch and provide financial services to its customers.
Suntech, a solar power company in China, cut the costs of its products to make them affordable to customers of limited means. Suntech also provides financial solutions that enable low-income customers to structure payments for its equipment. And when its photovoltaic cells reach the end of their life, the company takes them back for recycling.
3.2 Embedded Sustainability
The New Sustainability Champions embed sustainability in their company culture. They are aware that deep and sustained impact requires demonstrable commitment from the entire organization – not only from the top management team and certainly not solely from the chief executive. The best intentions can flounder, or be subverted, if they are implemented by a sceptical or indifferent team. Conversely, an engaged and proactive staff can be a constant source of new ideas for products, services, delivery mechanisms, talent development, supply sources and more.
New Sustainability Champions put in place the mechanisms that make sustainability an integral part of their business fabric. In particular:
They define a bold sustainability vision.
Champions stand out for the ways in which they define clear aspirations and goals for sustainability, and use them to galvanize the entire organization. They move beyond incremental change to create a vision capable of inspiring their staff – and external stakeholders. Sekem, an Egyptian organic food producer, took a holistic view of environmental and social development. The company wanted to use organic farming as a way to reclaim desert land, producing food for the local market and reinvesting the profits in the community. Sekem also has a highly unusual business model. While it is a profit-making enterprise, its aim is not profit maximization. Through a profit-sharing methodology, it shares its prosperity with the smallholder farmers in its network.
In 2008, at the height of the global financial crisis, the chief executive of Florida Ice & Farm in Costa Rica announced a dramatic change in business strategy to make the food and beverage company more sustainable. The company has set the goals of becoming water- neutral by 2012, achieving carbon neutrality by 2017 (a target even more ambitious than Costa Rica’s national goal of carbon neutrality by 2021) and becoming a “zero solid waste” company by 2012.
They integrate sustainability into operations.
At the same time, pragmatic business leaders recognize that inspiration alone is rarely enough to produce the desired outcomes, so they develop the appropriate incentives and metrics. Florida Ice & Farm exemplifies this approach. The company spent four years developing a balanced scorecard which measures non-financials such as the number of community service hours that employees spend on watershed- related activities. Remuneration is linked to such performance indicators. For example, 60% of the CEO’s salary is linked to the triple bottom line of “people, planet, profit”.
Masisa, a wood products manufacturer in Chile, developed a balanced scorecard on sustainability that measures performance in all dimensions, including non-financial indicators. The scorecard’s inputs and outputs cascade down to each worker and are tracked over time.
In Hong Kong, train operator MTR Corporation has made a clear link between sustainability and risk management. The company built a sophisticated framework – a Sustainable Competitive Advantage model – to guide its actions. One example of the framework in practice: eight environmental impact assessment reports are mandatory for every project to develop a new rail line. MTR Corporation also measures the impact of these projects on biodiversity both before and after the construction stage – an approach that is rarely found in its industry.
They engage the workforce in sustainability.
Aside from setting out a bold vision and integrating sustainability into everyday operations, it is necessary to fully engage the workforce. Natura, a Brazilian cosmetics company, invests heavily in training its managers to identify socio-environmental challenges and turn them into business opportunities. Natura’s staff is also motivated by bonuses based on environmental and social performance as well as on economic measures. And Woolworths, a South Africa- based retailer, works to boost employees’ pride in their jobs, ensuring they are rewarded for contributing ideas that improve the business. The success of this approach
can be seen in the fact that many of its best new initiatives do not come from senior management.
Sustainable Business Environments
The New Sustainability Champions actively share their own business environment. They recognize that maximum impact cannot be achieved solely within the boundaries of their own organizations. They understand that engagement with the wider business ecosystem of regulators, competitors, suppliers, customers and other stakeholders is required. They actively engage with these entities to shape the outcomes they envision for themselves.
They influence policies and standards.
Companies operating in weak regulatory regimes have the opportunity – and, arguably, the obligation – to define the standards to which the industry should aspire. While it is true that such companies benefit directly from the policies, they are also effectively using policy as a multiplier to augment the impact of higher standards across their industries. This can be achieved through direct discussions with policy-makers, or through associations and trade bodies.
One strong proponent of this approach is Brazilian organic sugar producer Grupo Balbo. The company aims to help turn the entire sugar industry into an organic sector. It is now collaborating on the creation of Brazil’s first national organic certification system. Balbo is in discussions with environmentally-minded politicians in Germany and Brazil to promote incentives such as tax breaks for organic production. The company has partnered
with a governmental environmental research department to conduct more than 1,600 biodiversity field studies.
In India, Suzlon, a wind power producer, uses its knowledge and experience to educate citizens and policy-makers. The company faces the challenge of getting the right policies in place to foster the development of renewable power, particularly in the United States. Internationally, Suzlon helps shape the debate on sustainability and renewable power through organizations such as the European Union Commission, the World Economic Forum and the United Nations, as well as through an active outreach programme to the media.
They partner to achieve mutual goals.
Partnerships with organizations that share similar goals can potentially generate far greater impact than if each were to work in isolation. For example, depending on their mandate and focus, NGOs could be potential allies with which for-profit businesses could collaborate.
Kenya’s Equity Bank has adopted this strategy. The bank has a host of partnerships that range from links to agrochemical manufacturers such as Agmark and trade bodies such as the Eastern Africa Grain Council to not-for-profit organizations such as Millennium Promise, aid agencies such as the German government’s GTZ and the United Nations World Food Programme. Equity Bank also has strategic partnerships with organizations such as the Alliance for a Green Revolution in Africa and The International Fund for Agricultural Development, a United Nations agency that provides cash guarantees that reduce the bank’s risk when lending to smallholder farmers who have little or no collateral.
New Britain Palm Oil, operating in Papua New Guinea, worked closely with local NGOs to engage with local communities. The connections helped to smooth negotiations involving land rights – a critical issue since conflicts with suppliers and landowners are the largest barriers to palm oil operations in the region.
They build awareness of the importance of sustainability.
Customers are among the key stakeholders who should be engaged to maximize the impact of sustainability initiatives. By educating customers about issues such as pollution, depletion of water or climate change, companies can help put pressure on industry to improve sustainability practices and on government to improve standards and enforcement.
In Brazil, sugar producer Grupo Balbo runs awareness-building campaigns targeting grocery shoppers as well as students and local communities. The company publishes data, including its sustainability report, to increase transparency and establish confidence among stakeholders as well as to spread knowledge and understanding of the organic cultivation of sugar cane.
In China, Broad Group has developed a miniaturized device for measuring air pollution that can fit inside a mobile phone. The device can help boost awareness of air pollution issues and even empower citizens by putting knowledge about air quality in the palms of their hands.