Green Innovation & Disruption: Devising and introducing new sustainable models within established businesses

Monday, May 10, 2010

18:00 - 21:15

All commentators agree that the green agenda brings with it a great deal of disruption. And for any well established large corporate it always goes against the grain to change a formula that works. This poses a quandary for all incumbents, who know that their modus operandi will one day be successfully challenged. Do you rip up the rule book, wait and follow or resist.

In this session we are delighted to be hearing from Ian Cheshire (CEO of Kingfisher, who own B&Q and others) on the opportunity he sees for his business and how it will be grasped.

The end game attached to Google's recent forays in to the energy marketplace are not totally clear, but it is clear this is an area that's in for a lot of upheaval. Benjamin Kott will reflect on this work and offer his thoughts on how Google's cultural mindset helps them grasp the new.

Hugo Spowers, an entrepreneur with a big vision around our future personal mobility, will be talking about what is involved in challenging the status quo with all stakeholders.

And Ramon Arratia from Interface will be offering some reflections from their pioneering journey. They are the original corporate re-invention story around the green agenda.

This may seem too big picture, but understanding the way in which you unlock innovative streaks in your business is vital to it surviving and thriving in the face of the sustainability agenda.

Speakers

Benjamin Kott Google

See bio

Ian Cheshire Kingfisher

See bio

Ramon Arratia Interface

See bio
Round Tables

Built Environment

Will we achieve a sustainable construction and property sector through gradual improvement or transformation change

Write UP

The Table enjoyed the presentations on innovation and considered how they might apply to the construction industry which is one of the most established industries.

What was disruptive innovation, if it did not come from the incumbents was it visible now. People were now thinking about design and construction as an environmental industry - solutions provider for sustainability.

The suggestion was that in such an industry it was a question of transformational change in our thinking process rather than in the technical that was likely to suddenly change. Arguably this was underway already. The technical changes would follow rather more gradually as a consequence.

The establishment of the UKGBC was mentioned as a move in the right direction as what was needed was a true dialogue between companys customers and end users. It was time to redefine the boundaries as the customer does not yet know what they want in the context of radical reduction of carbon.

It was going to involve significant change to the existing built environment and we needed to target what we can win now and research to enable us to address those things we currently cannot.

The worry of a fragmental industry and a question of how this major disadvantage could be shifted to be a positive benefit , possibly by finding ways to share whilst still competing.

A role for established institutions?

There was a need for much more rapid change given the size of the challenge.
Perhaps we just need a good crisis!

Supply Chain

Manufacturing location. How can the supply chain deal with issues such as global vs local sourcing?

Write UP

Two key questions were identified to understand the implications of global and local sourcing:

1. How can organisations decide whether global or local sourcing is likely to be more sustainable and lower carbon for their products and services?
2. How can organisations work with their suppliers to improve sustainability when they may be located on the other side of the planet?

A number of trade offs were identified when comparing local and global sourcing in terms of sustainability. Whilst consumers are often concerned about “food miles” and packaging, for many products these are far less significant than agricultural and manufacturing emissions. Examples given included the freight impact of Spanish tomatoes and New Zealand lamb, which are outweighed by the carbon savings from avoiding heated greenhouses and more efficient livestock practices. However, for bulky products such as drinks, the impact of freight can be far higher, favouring local supply. This highlighted the need for lifecycle analysis or product carbon footprinting in order to understand the trade-offs on a case by case basis. It was also pointed out that companies may not have a choice between local and global sourcing. For example, a policy to source fish from only sustainably managed fisheries requires sourcing from fisheries in the Pacific to meet demand. Similarly, cotton for the garment industry is largely grown in Asian countries. Rather than ship bulky raw materials, it also makes sense for added value activities to continue close to raw materials supplies and ship finished goods instead.

In terms or supplier development, many of the group acknowledged there were fewer barriers with working with local suppliers because they were closer, were often held to higher standards by legislation and had the same cultural awareness of environmental issues. When working with overseas suppliers, issues such as carbon reduction often had to be simplified and expressed in terms of energy saving. Whereas lifecycle analysis isn’t feasible for these suppliers, they can benefit from simple tools to track energy use per product and highlight potential cost saving opportunities.

Sustainability audits were seen as a valuable tool for managing remote suppliers but had to be used only after clear standards have been set and sufficient time allowed for suppliers to respond to them. Despite this, there was a preference to move beyond relying solely on minimum standards and audits (which are more adversarial in nature and only spot check performance on the day) to a more supportive “continuous improvement” approach. Simple measures to compliment supplier audits included worker hotlines, where supplier staff could whistle blow on any unfair working practices. Some organisations had even gone as far as seconding staff to overseas suppliers to transfer knowledge.

Reversing the “offshoring” trend to bring manufacturing and suppliers back to home markets was also discussed as a response to rising oil prices. Whilst this wasn’t seen as a widespread trend, examples were given where suppliers had chosen to increase local production. Some businesses had also retained UK manufacturing for quality and brand reasons, and argued that having suppliers close by made manufacturing and product innovations far easier to identify and implement.

Stakeholder Engagement

Convincing the Board

Write UP

This month we picked up the topic discussed at this table on January 11th. Our discussion covered most of the points already made last time, particularly noting the importance of gaining support outside of the board room, prior to important meetings, and in presenting the business case. A couple of extra points that came up were:

• Use competitor comparisons and benchmarking information to illustrate how the sector is moving forward and dealing with sustainability
• Consider use of external ‘experts’ on corporate responsibility, who will focus on the business case, to bring added experience and possible inspiration to the discussion.

To add to the “risks and opportunity” point from January’s event – the group felt that this includes not just efficiency gains but reputational risk and in the future recruitment and retention of high quality employees is likely to be an increasingly significant factor.

Carbon Strategies

At what point should offsets be introduced into your carbon management strategy? Examining the options

Write UP

Many companies, encouraged by the recent developments in the voluntary carbon market around standards and public registries, are currently re-evaluating their position on using voluntary offsetting as a key element of their carbon reduction strategy. This month’s carbon management table set out to explore the different strategies for incorporating voluntary carbon offsetting into a robust carbon management programme. The group examined the rationale for introducing offsets at various stages of a business’s programme implementation.

Initial discussions focused on the different approaches that are possible for businesses to take when considering offsetting:

1. The company offsets its carbon emissions from the outset of the implementation of carbon management programme o This strategy shows an absolute commitment to reducing global carbon emissions reduction and tackling climate change o Alongside internal emissions reductions this approach is the most robust, and can actually incentivize further energy efficiencies if charged back to internal business units.
2. The commitment to incorporating voluntary carbon credits at some point in the future once a certain level of internal emissions reductions have been made o A fixed point should be chosen by which time offsets will be incorporated. If no fixed point is decided upon then the message is weakened as for all the time no offsetting is taking place, emissions are still being generated and increasing the overall concentration of GHGs in the atmosphere o This model is initially cheaper as it may be one or more years until offsets need to be purchased
3. Offsetting can be incorporated in stages throughout the carbon management strategy commitment period. This model has the advantage of enabling the organization to understand before and learn about process before full commitment kicks in.
- The company can build up its offsetting commitment slowly, for example by offsetting event and/or flights in Year 1, progressing to electricity and gas consumption in subsequent years.
- Stakeholders are given the chance to learn about offsetting as the business commitment increases making it easier to accept and understand.

In addition to the above considerations, the additional social impacts that projects bring were also seen as important factors when considering an offsetting strategy as part of an overall comprehensive carbon management programme. It was thought that for the majority of businesses it was reasonably important that projects should in some way be aligned with the operations or ethics of the business.

In conclusion, the main message was that any of voluntary carbon considered above, must be undertaken as part of a well-researched and considered, comprehensive carbon or environmental management programme and not in isolation.

Finance & Corporate Sustainability

Energy efficiency financing

Write UP

Discussion centred on:
• The opportunities and challenges that are present for companies that specialise in energy efficient products and services to obtain financing.
• How companies and householders can finance implementing energy efficiency solutions in their operations and homes.

Outcomes:
• Green Investment Bank - to handle Government funding and secure private investment for green businesses - including those centred around energy efficient products/services.
• Green Mortgage - any finance invested to make a building (domestic or commercial) energy efficient should be attached to the mortgage of the building so that it can be passed on to next buyer.
• Grant Scheme/Low interest loans - Made available to companies / individuals who invest capital in energy efficient products / renovations.
• Renewable Energy organisations - such as Carbon Trust offering low interest loans to SME's in order to finance energy efficient investments.
• Government Regulation - Using scheme's such as CRC to give businesses incentives to invest in energy efficiency solutions, thus, promoting investment for company's with energy efficiency solutions.
• Impact / Sustainable investing - there is increasing interest in Impact Investing which helps address social and/or environmental problems while also turning a profit. This type of investing could be a great opportunity for green energy companies.
• Schemes like London ESCO - a joint venture company between EDF and London Climate Change Agency - to provide sustainable low carbon energy solutions for London development schemes.

Challenges:
• Where commercial property is involved - demand needs to be there on the part of the occupiers for an energy efficient space.
• Where domestic properties are involved - householders reluctant to invest initial capital to invest in making homes more efficient.
• Government regulations and grant schemes may be inconsistent, by way of example; Germany was very pro bio fuels for a period and is now changing focus - leaving companies who invested in Bio fuels in a precarious position.

Communications

Collaboration can create disruptive innovation, especially on complex issues like sustainability and examples of co-creation and sustainability are few and far between. We will explore this

Write UP

For this month’s Green Communications table, we asked the group to discuss how communications could be used to encourage collaboration for behaviour change.
It was a wide ranging discussion, with some very interesting perspectives. A number of key themes emerged:
>Incentivize change
Answering the ‘what’s in it for me?’ question is the only way to encourage people to change, but it’s not a simple science. One example, from Greece, raised the question of whether focusing on local issues, that are more important and visible to people, could be a good way of identifying the right incentive.

>Combine short-term and long-term incentives
Short term, financial incentives are good for grabbing attention, encouraging short term individual or business behaviour change on certain things. However, evidence shows that this can result in savings being used on unsustainable activities, therefore there is no net impact reduction. Combining short-term incentives with long term incentives, e.g. appealing to people’s values and their desire to ‘do the right thing’, can help avoid this pitfall.

>Be bold with the direction but collaborative with the route
People are looking for leadership on sustainability, but they also want to be involved. The group felt that combining a bold direction with a collaborative approach was a good way to deliver comprehensive change.

>Consider sectoral approaches
Examples of collaborative and competitive sectoral approaches were given that had driven significant change, these included coalitions of businesses acting together and the fierce competition that can be found in the supermarket sector. What was evident was that these had driven real change. Therefore, it’s important for communicators to consider their broad sector and the likely responses when designing communications for change.

>More than comms
Changing behaviour requires more than just communications. Infrastructural changes are needed to design out the negative behaviours. Whether this is through choice-editing or changing the default behaviour from unsustainable to sustainable, it’s clear that agents of change need to think broadly.

>Beware the green halo effect Brands that are successful in driving change through one aspect of their business tend to get the benefit of the green halo effect – all their activities are assumed to be green. This may not be the case though. Unless this gap between perception and reality is addressed, brands run the risk of inadvertently greenwashing.

CSR Reporting Best Practices

Influencing for Sustainability: How to get CSR to the top of the corporate agenda

Write UP

Our roundtable focus for May’s Green Monday event was on influencing and specifically to address the challenges and frustrating experienced by many CSR managers and directors to learn how to influence at board level to raise the profile and impact of this important activity. We were an eclectic group spanning CSR managers, government, recruitment, verification and communications experts all with their own experiences and insights.

One key insight discussed was the experience, position and background of CSR people in organisations. We noted that CSR is spread around a range of functions in businesses including External Relations, Marketing, Health and Safety, Finance, R&D and Supply Chain. This brings a couple of related challenges; 1. How the group reports into the board may vary – some directly to CEO, others via COO, CMO or others. Some not at all.
2. The background and suitability of the CSR experts in communicating to the board may vary – some are technical people, some have finance backgrounds, some communications.

So our first “top tip” to influence at board level is both simple and difficult to tackle:
Recognise your own background and style and work with others to fill the gaps that the board will want to see.

If you are a Sustainability expert, then that passion and technical credibility will go a long way – don’t hide it! But make sure that you work with communications or finance experts to round out your messages and hit the right notes to influence effectively at the highest levels.

Another insight, building on the above, was the identification of what the board, or senior leaders, will want to hear to be influenced. Often the first thing that Sustainability and CSR people communicate is their passion & conviction. This is important and is often shared at the highest levels – after all, the CEO was visionary enough to build a CSR team and make commitments!

To get to the next stage – to really drive big ticket strategic action on CSR insights and agendas – the CEO needs more. He or she needs to understand the real business case, the risks, rewards and the tangibility to bring your passion to reality – what will make this work? Why is this the right thing for the business to do? Remember – the board and the CEO are accountable to many groups; the shareholders, customers and not least employees. Every decision must be taken in the balance and not only to satisfy environmental challenges, critical though they are.

So our second Top Tip to effective influencing:
Put yourself in the Board’s position – what is the right path for the business, considering all aspects?

If you can’t answer, the by Tip #1, find help that can! This doesn’t mean that everything has to be resolved to a return-on-investment of less than a year, but it does mean that all the aspects need to be considered and objectively addressed. If the conviction is to close down a high-impact business stream, then what is the impact on employees, on the local economy, on customers for that product, and so on?
A third, highly stimulating topic of discussion was the concept of “influencing downwards”. We recognised the importance for CSR experts of influencing their colleagues and the business in general. Two areas were raised:

1. The role of CSR reporting in communicating to employees, driving engagement by putting the facts in their hands, encouraging collective responsibility and pride.
2. The importance as small businesses become bigger businesses of “codifying sustainability”; as the business grows, so individual passion is replaced by the company culture, systems and processes that underpin real behaviours.

Top Tip number three then: Build Sustainability into everything that the business does by influencing the culture and by putting the facts into everyone’s hands for collective commitment and pride

Technology

Renewables and the Next Government

Write UP

The negotiations between the different parties were in full swing when this timely discussion took place and it was unclear who would form the next government as formal negotiations between LibDems/Labour had just started. REA's Leonie Greene therefore provided an overview of the positions of different parties on key aspects of renewables policy. The table speculated on who would most likely form the government and where they would need to focus attention to ensure the UK's renewables targets were met. Generally whoever took over the scale of the table agreed the challenge facing the UK was clearly enormous, particularly given the economic circumstances. A participant from BIS underlined the increasing awareness of the economic growth potential in the target and REA agreed it needed to do more to make direct links with departments promoting economic development.

Sustainability through ICT

Green tech investment: What are the 7 main areas of opportunity

Write UP

1. Invest in energy efficient product designs : 'cradle to cradle' thinking in terms of embedded energy (as well as usage energy), recyclable materials, reuse before recycling, modular upgradeability versus 'rip and replace'. Energy efficient components (CPUs etc.)
2. Smart Buildings : design for efficiency, monitoring and adjustment. Invest in solutions for the 'retro-fit' market because 'green-field' is a small percentage. Technologies that make buildings more adaptable to occupier needs changes.
3. Solutions that make consumer behaviour visible at an individual and collective level e.g. Google Power Meter.
4. 'Converged' consumer devices ; why are so many marginally differing set-top boxes in operation that have to be swapped whenever consumers change service provider (same for broadband routers) - opportunity for sector participants to collaborate around standards and manufacturers e.g. Pace to design differently.
5. Smart networks (at various scales, buildings, cities, countries:'systems talking to systems' to manage consumption (especially peak consumption) and efficiency e.g. transport management efficiency (public, vehicles, flights)
6. Growth opportunities in services across the board because services are 'inherently cleaner' for example software ystems for tracking lifecycle resource costs (even through extended supply chains).
7. There is a role for government to direct its own spend to incentivise energy efficiency more aggressively (e.g. greater consolidation and sharing, greener products) as well as to provide green technology innovation funding.

Energy Effeciency

How can the CRC reduce the carbon footprint of your product or service? What effect will this have on your brand?

Sustainable Transport

Technological solutions for sustainable transport. What is the role of technology in making transport sustainable? And how strong is the business case?

Write UP

Technology offers to help us be more sustainable in our use of transport, ranging from better vehicles to better use of vehicles and avoiding travel altogether. But what really works now, and what technology is likely to be right for the future? And how can we take the right steps now to encourage innovation?

A number of key themes emerged from our round table discussions:

1. The customer must be at the heart of any technological solution to sustainable transport
• Make it fit for purpose – eg SNCF offering full journey planning service not just station to station; Eurostar ‘interlining’
• Make it make sense in conventional terms– eg economically attractive feed in tariffs for solar power; fit with customers’ existing technologies and gadgetry
• Make it noticeable – eg carbon gauge
• Make it fun – eg sharing knowledge on sustainable ways of travelling, which creates pride
• Make it safe – eg car sharing trust factor

2. Evolution not revolution in the short term
• Infrastructure owners are not going to throw away their investment in existing technological infrastructure – eg production lines and supply chains
• Even simple and effective solutions like car sharing and home working for would-be-commuters needs technology, but that technology already exists. The issue is making it available cheaply and reliably enough – eg company support for lift sharing websites and for out-of-office work patterns
• Making connections between modes of transport as efficient as possible would greatly help to switch people away from private car use – eg multi-modal information and planning systems; working with adjacent industries eg bike rental, zipcar and taxi
• Making lower-carbon travel as attractive as possible would also help – eg really good wifi on trains, which would also provide a marketing benefit to train operators
• Ensure the technology is easy to understand so that it can be used efficiently and effectively

3. But in the longer term new ways of doing things will be necessary to meet tough emissions reduction targets
• Due to vested interests in existing infrastructure, innovation is more likely to come from outside the established industry players – eg fuel cell technology
• Government needs to provide the enabling infrastructure for substantial shifts away from carbon-intensive travel – eg DfT’s Plugged in Places initiative

ACTIONS
• Business leaders – the technology needed to support change sorts itself out with clear business leadership and sense of purpose
• Government – pump priming of transformative technologies for step-change emissions reduction

Corporate Strategies

Most successful and distinctive sustainability strategies. Interface Case Study: Mission Zero

Write UP

Ramon Arratia, InterfaceFLOR's European Sustainability Manager, had just delivered a keynote address on how CEO, Ray Anderson, had made a very bold move in 1994 to set the company on a path to Mission Zero footprint by 2020. Ramon described this as climbing Mount Sustainability and how hard it has been just to reach base camp.

The table looked at the 7 fronts of Mission Zero and agreed that their sustainability strategy has delivered first mover advantage and notable brand distinctiveness. However, one participant suggested that they have more work to do on price as their competitors are also apparently demonstrating sustainability at the same time as being more price competitive. Another enquired about the “catalyst” for such a bold strategy and was told that, according to Ray Anderson, it was Paul Hawken’s book, “The Ecology of Commerce”. This got the group talking about other CEO catalysts, such as Al Gore for Stuart Rose of M&S and Hurricane Katrina for Lee Scott of WalMart which brought up how other drivers such as new legislation and changing customer demand can provide the catalyst. The group picked up on the CRC Energy Efficiency scheme (which most agreed was too complicated). On a more positive note, the discussion ended on the importance of a sustainability strategy being authentic, building on the core competencies & values of the organisation. A question left to ponder was: “What happened to BP’s beyond petroleum and will BP recover now?”

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.