Change Management - how Sustainability can transform an organisation.

Monday, November 07, 2011

18:00 - 20:30

Management teams that deliver successful change management programmes are rare and highly valued. Something will have created the need for change – a new disruptive technology, a competitor with a new business model or a failed strategy – and the Board recognises that the continuation of the current strategy could be fatal to the organisation. But, identifying the need for change is just the beginning – you then move to challenges such as engaging key people who are obstructive to change, determining the right level of innovation risk, managing the “old” business whilst building the new etc.

Green Monday on the 7th November will look at “green” change management – programmes that are necessitated by issues such as resource scarcity, the emerging policy framework, or stakeholder pressure, sometimes a combination of all three. It is the sort of programme that has been introduced at Nissan, GE, Siemens, M&S, Philips and Unilever, to great effect. We will hear from a big company that is undergoing a green change management programme, a company that underwent a successful programme during the dot- com disruption, someone who is delivering change from within a FTSE100 and an advisor to companies who are embarking on change.

Confirmed speakers include;

  • Richard Tarboton, Director of Energy and Carbon for BT, will talk about how individuals can create the basis for change from within an organisation.
  • Doug Johnston, Director of Climate Change and Sustainability at Ernst and Young, will give us insights into how to construct an effective change management programme.
  • Kersten Barth, Sustainability Director, Siemens AG. We put Siemens firmly in 5% of the Global 500 that have a “next generation” Sustainability strategy – not only do 33% of total revenue now come from environmental products, but it also has an effective energy efficiency and supply chain strategy. Kersten will tell the story of the transformation of Siemens.
  • Jerry Hardcastle, VP for Engineering in Europe & Vehicle Marketability Globally, Nissan. Nissan's electric vehicle story may turn into one of the biggest sustainability strategies of the decade - Jerry will tell us how CEO Carlos Ghosn's decision in 2008 to put EVs at the heard of the Nissan strategy has changed the way Nissan do business.
Speakers

Doug Johnston EY

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Jerry Hardcastle Nissan

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Kersten Barth Siemens AG

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Richard Tarboton BT

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Round Tables

Built Environment

How do you communicate the business case of "green" buildings to the Board?

Supply Chain

Will Sustainability change how companies work with their supply chains?

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The group reflected on the ways in which sustainability had changed the way they worked with their supply chains in the last 12 month, the drivers and business cases behind such change and the challenges they face in the year ahead. Some of the key challenges faced were:

(A) Overcoming persistent beliefs that sustainability is a net cost rather than net benefit and in project based cultures that it may cause delay.

(B) Finding reliable information in complex supply chains to actually measure impacts and therefore make informed decisions on improvement.

(C) Articulating a quantitative business case “beyond energy efficiency” for example for other impacts like water or other commodities like Soy or Palm Oil in ways that resonated with corporate culture and the language of core business functions like finance and procurement.

(D) Spanning the gap between “consent and commitment” between senior level rhetoric, operational middle management and daily implementation in core business functions.

Some examples of good practices included:
(I) Sharing costs of waste management amongst local authorities by pooling procurement and re-structuring the logistics of waste collection more efficiently: increase efficiency and reducing costs and environmental impacts.

(II) Translating sustainability impacts into the dominant corporate language e.g. creating worst case scenarios and showing their risks and reputational impacts within risk averse organisations; translating reduction of sustainability impacts into reduced (or capped) supply chain costs where finance rules.

(III) Demonstrating cost savings internally and then leveraging the credibility of “walking the talk” to sell services based on these savings to clients - generating revenues – thus expanding the business case to top and bottom line benefits.

(IV) Using sustainability as a driver for supply chain innovation – leading to product differentiation – leading to competitive advantage – increased market share and revenues: Strategic but hard to quantify and hard to scale.

It was noted that realism, accuracy and caution about overstating claims is needed in all business cases for sustainability and recent research had shown that the business case for completely carbon neutral buildings “did not stack up”. Current conditions will put business cases under increased pressure and tools are needed to support this.

Carbon Strategies

How do you keep carbon relevant to corporate strategy in a recession?

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The table expressed the current concerns;

• Keeping the non-financial / non-cost-saving elements of carbon management on the agenda
• Dealing with internal politics as the competition for funding increases
• Rolling out decentralised energy in a cost-constrained environment
• Initiating public and private sector collaboration
• Balancing energy security, carbon and cost considerations.

The table set about answering the question as to how we can keep carbon on the agenda, and flagged the following tips;

• All about savings – If we can show demonstrable cost savings we can keep carbon relevant, and perhaps even more relevant, during times of recession
• Supply chain pressure - Carbon is still on the customer’s agenda, and so it should still be on our agenda
• Staff / recruitment expectation – People businesses need to ensure that staff and new recruits find the company’s carbon stance acceptable, and so cannot let the carbon agenda slip
• Legal compliance – where laws exist there is no choice; EU ETS, CCA, CRC
• Carbon prices – If the cost of carbon was truly reflected in the price of goods and services then carbon would remain on the agenda
• Carbon targets – Publicly expressed carbon targets create an organisational commitment and make it harder to ignore emissions in good times or in bad
• Individual objectives – Placing carbon performance in individual objectives maintains focus
• Brand risk – Reputational risk can keep carbon on the agenda.

Set the problem; “If you go into the office tomorrow and your boss tells you that the carbon management budget has been cancelled, what would you say?” the table responded with the following comments;

• Energy is becoming more expensive all the time, we need to keep a focus on reduction
• If we do that, people will leave and we will find it harder to recruit
• It’s about long-term sustainability of our business
• It’s about managing risk, over 40% of 2010 insurances claims were weather-related
• Our customers are demanding it, so if we cut the budget we’ll upset our clients.

Finance & Corporate Sustainability

Can the correct use of Whole Life Costing transform investment and product development decisions?

Communications

How do you communicate sustainability to make it more relevant in a recession?

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*Decided that the answer was almost a part of the question – it’s about relevance, or making it “something to do with me”

*Investors need clearer information about the tangible (financial) impacts of sustainability initiatives – although this needs to extend beyond just environmental factors

*For employees, it’s about giving the right level of structure balanced against empowerment to change things (eg in Green Teams)

*It’s also about having a clear idea about what you want people to know, feel and do.
*With tight budgets, the CDP was recognised as one of the most helpful external standards to submit to

*Acknowledged that relevance is also built by engaging the head and the heart

*Never a better time to invest in sustainability leadership than during a recession because it positions you to be more successful when the recession ends

*Mind your language – ‘climate change’ and ‘carbon’ can be unhelpful words (as can CSR and Sustainability)

*It shouldn’t look too expensive

*Tangible things can help communications more than just words (eg homeworking)

*Bear in mind the need to tailor message and language according to geographies

Technology

How will the Green Deal work?

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The Green Deal represents the domestic embodiment of performance contracting; where energy savings are used to fund projects. The discussion was intended to review the DECC consultation on Green Deal but publication has been delayed. A wider discussion took place on how Clients are increasingly buying the performance rather than products. This attuned to the plenary discussion where Richard Tarboton in particular noted the need to make the business case.

- Energy savings and business opportunities are driving sustainability inside major corporate organisations rather than carbon emissions and concerns about public profile.
- End users are suspicious about the promise of future energy savings
- this would make them reluctant to commit to repay grants from Green Deal based on predicted reductions in their energy bills.
- Energy companies cannot give roof insulation away – why will people pay for it?
- more persuaded by the arguments of the corporate sustainability chiefs who say the potential bottom line financial savings are more likely to shape the future energy saving market.
- Government policy on FiTs has damaged investor confidence
- The Business case is preeminent in bidding for energy saving projects
- Government has to stimulate demand to make the Green Deal work
- Companies must prove their credibility by delivering on the promise of renewable technologies

Energy Effeciency

How can an energy efficiency programme fund a whole Sustainability programme from savings?

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The Green Deal represents the domestic embodiment of performance contracting; where energy savings are used to fund projects. The discussion was intended to review the DECC consultation on Green Deal but publication has been delayed. A wider discussion took place on how Clients are increasingly buying the performance rather than products. This attuned to the plenary discussion where Richard Tarboton in particular noted the need to make the business case.


*Energy savings and business opportunities are driving sustainability inside major corporate organisations rather than carbon emissions and concerns about public profile.

*End users are suspicious about the promise of future energy savings

*this would make them reluctant to commit to repay grants from Green Deal based on predicted reductions in their energy bills.

*Energy companies cannot give roof insulation away – why will people pay for it?

*more persuaded by the arguments of the corporate sustainability chiefs who say the potential bottom line financial savings are more likely to shape the future energy saving market.

*Government policy on FiTs has damaged investor confidence

*The Business case is preeminent in bidding for energy saving projects

*Government has to stimulate demand to make the Green Deal work

*Companies must prove their credibility by delivering on the promise of renewable technologies

Corporate Strategies

How should Sustainability programmes change in response to a recession?

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*Sustainability programmes will have many legitimate objectives and priorities. The key in a recession is to prioritise the issues that will have most resonance in the business. Adopt a guerrilla strategy as opposed to a military strategy. A military strategy has a single clear objective irrespective of the obstacles, a guerrilla strategy may have multiple objectives and operations can be rapidly flexed given changing circumstances. The issues gaining resonance and traction at the moment relate to cost control and aligning the business’s growth agenda with the mega trends of resource scarcity, population growth, climate change and urbanisation etc.

*Strategic leadership - Clear strategic leadership will ensure that sustainability programmes survive despite the recession. In the plenary, we heard how Nissan’s leadership retained an unwavering focus on electric vehicles despite the recession.

*Cost control - Looking at the business with a sustainability lens allows significant efficiencies to be identified. We heard a great example of how identifying the issue of overpackaging from suppliers in a depot wasn’t simply an environmental issue but had significant cost implications. More people were needed to decant the product, fewer units could be fitted into a container, packaging was over specified and more expensive than needed and the company was paying for waste disposal when it could have been reused. A business wide project is now underway to address the issue of packaging reduction strategically with multi million pounds anticipated in cost savings.

*Change management - In a recession we heard of the need to focus on core business, change management around issues that are not perceived to be core business is often problematic, even if the senior managers ‘get it’. Middle management have to be more focused in times of recession and so have less ‘bandwidth’ to consider wider issues.

Energy Policy & Strategy

How should companies be forecasting energy prices and policy in these uncertain times?

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The focus of this month’s round table was the use of energy and policy forecasts and how businesses should and do account for the changing pricing and regulatory environment in their investment decisions.

The overriding opinion was that energy prices will increase over the long term and that business must be prepared for that. Recent developments in the Middle East, the Japanese nuclear crisis have added a new level of risk to the future energy landscape. It was felt that businesses need to account for these external risks when planning for the future or looking at projects to invest in. A high priced environment certainly improves the business case for lowering consumption or investing in energy efficiency measures but essentially every decision boils down to the rate of return.

The consensus was that predicting the future was next to impossible. While it is useful to have a steer as to future price and policy direction, global events and the multitude of factors that can blow a forecast off course make the forecasts themselves largely redundant. One delegate from the Steel sector indicated that projections for met coal and iron ore prices, for example are almost non-existent and this is reflected in the way the sector procures the commodities. It was agreed that forecasts are useful to the point of providing a glimpse of the future, although a scenario based approached where different assumptions and sensitivities are tested is more valuable especially if applying the assumptions to a business case for a range of low carbon investment projects.

Most companies do use forecasts or scenario-based projections in their planning cycles, often with varying time horizons. Anything beyond 10 years was felt to be too extreme and risked becoming meaningless; those that use them are more short-term often to reflect their business planning cycles, max 5 years.

Ideally businesses would like to factor in changing government policy in their planning although most felt this was near impossible due to the complexities and likelihood of policy measures and goals being shifted in the future.
How it was argued that it was more important to include carbon costs in forward thinking, not necessarily the cost of carbon but more the returns that could be made if carbon production is reduced. The plenary panel made the point that carbon was an essential driver of change in business practice and this view was shared by the table, although the value of any carbon / energy saving scheme must be the overriding conclusion.

Where companies do see value in forecasting is in relation to consumption. Any change management can lead to changing consumption patterns and through accurate consumption forecasts benchmarked against actual consumption businesses should be able to get a better indication of how their activities will impact on their bottom line.

Concluding remarks

*Forecasts have their place but due to the global interactions on price and constantly shifting policy goals, little weight is applied to forecasts

*A scenario based approach is useful when examining the returns in low carbon investment projections

*Carbon is the critical driver in changing business practice. Projections should be about how operational changes impact on carbon production and the value that these changes bring

Resource Efficiency

How do you take resource efficiency in to the board room?

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A strong business case is fundamental; without it any request for investment is likely to fail.

*The business case must be able to demonstrate that a sustainability programme will deliver bottom-line benefits. A strong business case will:
o Have a clear vision
o Clearly link to business strategy (e.g. customer retention, new product development etc.)
o Have strong governance and accountability. (Who is driving the strategy at board level? How is performance measured?)
o Be clear what it will do for the business

*The sustainability ambition must be aligned with business objectives. If not, even a well-structured and resourced plan is likely to flounder.

*Case studies demonstrating how other companies have implemented sustainability projects are valuable because they provide evidence and help reduce perceived risk.

*We need to speak in business language. For example, replace the term ‘CO2 reduction’ in the Sustainability Managers’ lexicon with ‘cost savings’ for the board room.

*CSR is seen as an additional benefit for many businesses but is not a driver in itself, unless the company has made this a key differentiator and part of its business strategy.

*Consider other drivers for sustainability in the business. Some businesses (e.g. electronics sector) see resource efficiency as an essential part of their risk management strategy in order to ensure long-term availability of rare material resources.

*Change creates both opportunities and threats. Investors and VCs are excited by small businesses that are able to capitalise on opportunities and show big growth potential.

*Disclosure of company carbon performance and industry benchmarking can raise the agenda at board level. Can also provide a means of differentiation for SMEs.

*The presentation and perceptions of sustainability to the Board are important. Consider involvement of marketing expertise to help sell the concept internally.

*In summary, a strong business case is key. Everything else is about how to make the business case.

Plenary roundtable - 1

What are the 5 key components of a Green Change Management programme?

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*Create appropriate branding for the programme so that it has appropriate resonance with both internal and external stakeholders. Terms such as 'green' and 'sustainability' should be used with caution as they can alienate certain stakeholders.

*Bring the right people together - successful programmes require teams and individuals to come together from across the organisation including: finance, supply chain, HSE, engineering, marketing etc etc

*Good data management with KPI's that measure not only environmental performance but value that's delivered

*Leadership - the team discussed different types of leadership required for successful programmes. This included Visionary leaders who can create an understanding pf what a 'step change' would look like through to leadership which can actually deliver the change and keep appropriate resources focused on the change.

*Products - a successful programme needs to be aligned with the core proposition of the business to make it better. Leadership on product innovation was discussed and a lot of the value and recognition of this comes from being first.

*Communications - both effective external and internal communications are essential to support programme buy-in as well as to communicate benefits and maintain momentum.

Venue Detail

Bank of America Merrill Lynch: King Edward Hall

King Edward Hall | 2 King Edward Street | London | EC1A 1HQ

Directions

Bank of America's offices are a very short walk from St Paul's tube station (Central Line). Exit the station at Cheapside/Newgate Street. Go past the BT centre, with it on your right-hand side and take the first available right down Edward Street. Continue down this road for 80m and the entrance to the venue is on your left-hand side.

Do not go to the main reception desk at their offices when you arrive. You are looking for an entrance that leads you directly into the King Edward Hall.