With increasing responsibility being parked at the CEOs door, we had an evening with one of the most progressive of the FTSE100 CEOs. Ian is an excellent public speaker, and it was a rare opportunity to get inside the mind of a FTSE100 CEO just as he was embedding sustainability into core strategy. Kingfisher is gearing up to be a big sustainability story of the future
Ian wanted a two-way flow of information. He summarised Kingfisher's strategy, answered questions from the audience and then crowdsourced the audience's expertise in key areas. The evening covered the following areas:
What inspires a CEO to transform an organisation?
What are the main obstacles a CEO will encounter in driving change?
How can sustainability succeed in tough economic conditions?
How should the Sustainability Function communicate with the CEO?
Should companies actively promote the value of sustainability to investors?
Is the "social contract" between business and society strengthening or not?
Latest thinking: what are the solutions for overcoming the landlord / tenant obstacle in energy efficiency? Chaired by Daniel Crowe, Utilyx
There are various ways of managing the split incentives between landlords (property owners) and tenants (energy bill payers). These include convincing the landlord that improved efficiency is a good investment and the mismatch between lease lengths and payback periods. Solutions mentioned included various commercial arrangements where it is financially attractive for all parties to improve energy efficiency, using energy efficiency as a negotiating tool at lease renewal (for both landlards and tenants in the current buyers market) and a range of minimum energy standards to be imposed as requirements on landlords.
- Broadband capacity is another point for negotiation with landlords like energy efficiency of buildings.
- Perception by investors that cost issue not in way of improving revenue
- How to get commercial tenants really committed to sustainable buildings + the landlord?
- How to align landlords + tenants where landlords incur capital investment but tenants get savings?
- Rent problem is visiability of true performance data
- Meters need to be everywhere. Measure everything
Length of tenants investment timeframes
- Land Securities, British Land
- Threadneedle (Stanhope) -Lifetime engagement between landlord tenant.
- Innovative structure
- Linklaters as tenant driving change to their building
- Reputation of energy consumption in housing (could produce adverse results) (looking at Dutch heat law)
- Planning authorities attitudes to refurbishing listed buildings
- Viridian- rental “total occupancy” cost based rent idea. i.e. include heat consumption in occupancy cost
- Tenants, Commercial- Incentivise landlords through tenant requirements, e.g. Linklaters drive change: this is what we want. Innovation in building materials + design will help listed buildings, e.g Simons sash windows
- Metering! Paradigm shift with metering, changes the conversation between landlord and tenant
- Timing of the conversation in terms of lease re-gear v. third party investment model. Use 3rd party investment if timing permits
- Investment timeframes, landlord v tenant leases vs efficiency returns. Extend leases or align investors
What are the best ways of sharing sustainability knowledge through their supply chain? Chaired by Sandy Smith, Director of Sustainability at PE International
The topic produced a wide ranging discussion identifying that when it comes to how we share knowledge in the supply chain, then the frameworks and options are considerably varied from Wikis, software tools, supply chains questionnaires, industry driven collaborations, workshops and even individual hand-holding with suppliers. Some good examples are being identified as to what best practice may look like, for example, Sedex, but would suggest that the conversation highlighted that this is an emerging issue. The complexity of how to deal with sustainability in the supply chain is immense considering the plethora of issues and products which need addressing. Clearly a prioritisation is needed and further development and roll out of software/web based solutions which provide cost effective solutions to capture, manage and share information.
- Challenge with models such as String- data integrity v’s how do we get true visibility/ traceability- e.g. commodity sold through auctions
- Collaboration among companies to encourage supplies to improve practises can be effective- but can be hampered by European Competition Law
- Sedex not good for services.
- B&Q paying for marketing material for eco-products
- Sainsburys with their work in the Diary sector
- Be very careful about competition causing problems with sustainable collaboration
- Historic future’s tool String is very good for the cotton sector. A web based tool which all parties in the supply chain pay a small amount making it cost effective
- BIM: Building Information Modeling
- Greenstone Carbon Management, Credit 360, Sedex, PE International SoFi
- Specification and best practice guides published by trade association
What will happen to the carbon management and sustainability agenda in 2012, and how should companies respond? Chaired by Jamal Gore, Carbon Clear
- Legislation - how fast do companies change versus changing legislation
- To provide consumers with greener options that have a clear value to add
- Companies to improve awareness to investors to importance of ecosystems & companies relationships
- How to highlight sustainability initiatives without exposing the negative areas of the business
- London Underground saved 10% on some of stations
- BP as an example of a company that had to open up and admit shortcomings
- Coca-Cola Europe to replace water they take in water-stressed areas
- Unilever adding corporate brand to brand to engage on sustainability
- Durban UN results as an impetus for action
- Issues like water may resonate better than a generic carbon/climate change message, to drive more sustainable consumer behaviour
- Using social media i.e twitter to push gtreen agenda
- As industry leaders we can work to make our messages meaningful and relevant. 'Join the dots'
- Opportunities for corporates to lead opinion of their customers (on adaptation and climate change)
Getting investor buy-in: how to engage investors in the long-term benefits of corporate sustainability? Chaired by Joe Flanagan, Principal Consultant of Sustainability at Ceram
Ian Cheshire set the mood for this topic during the plenary session when there was little positive to report on the question of investment in sustainability for the longer term.
Surprisingly once the topic moved from Corporate on to domestic/public there was a flurry of inputs on aspects such as Green Deal and the positive spin offs it should create for investors (if Government policy is consistent). On the corporate front the one key positive area (although not without some scepticism) is the issue of SRI (Socially Responsible Investment). SRI related funds do well – that is a fact!. The next agrees step is to have sustainability principles across all aspects of a company/organisation rather than just isolated pockets to tick the SRI box.
Inevitably the discussion drifted away from the Corporate side again, but with good reason. Real long term benefits from investment in sustainability were highlighted in 2 particular areas – the US military where the short term payback on energy efficiency has saved money (and lives) as less fuel transportation is needed. The City of Leeds is undertaking a programme to reduce energy usage by 40% by 2010 and is already seeing the financial benefit from this.
- Market certainty, there isn't much!
- Mortgage companies adding burdens on homeowner. Market uncertainty, political
customer, consumer not trading off less money today for more money tomorrow
- How to make a priority? Misperception. Short term thinking. Money now over money later. - Perception of poorer returns. Gap between business and housegold behaviour.
- Credibility issue. Lack of market uncertainty.
- Need certainty. Track record on Fifs, CRC, EPC has led to poor investor confidence
- Poor perceptions amongst investor community
- Energy efficiency/sustainability - is it sexy to the end user? Insulate your loft vs 42" plasma
- Insurance distinguishes between sectors so take a more segmented approach. M&S, BT, US Army, Pentagon
- HBS study showing highly sustainable businesses deliver a better long term than less sustainable business
- Defence investment in energy reduction to meet government savings targets
- Leeds energy by 40% by 2020 with good returns
- Community windfarms, good return, good concept. Bloomberg, army
- S'Y is not in due dilligence. Not even doing mitigation but adaption is big challenge
- Energy efficiency products from energy companies. Sceptics.
- City not understanding risk/opportunity
- Too much emphasis on long term investments may lead to nothing happening in short term
- Changes in government policy - investors lost confidence eg FIT
- Better regulation. Carbon and water tax on product
- Use regulation to enforce sustainable behaviour eg. Building regulations
- Price value of sustainability?
- Role of forward thinking leaders in 'working' of investment community. Concrete examples of good returns
- Use of mortgages for Green Deal. Different metrics. Rating agencies. Increased market certainty, consequential improvements. Regulation. Enforcement eg. EPCs. Price the externalities
Should companies lead or follow their customers on the issue of sustainability? Chaired by Ben Tuxworth, Salter Baxter
At the Green Communications table we considered the question – Should companies lead or follow their customers on the issue of sustainability? After quickly agreeing that they should indeed lead, our conversation turned mostly on 'how?'. The first rule seems to be not to talk about green or sustainable directly – proxies that resonate with individuals (health, local, saving money etc) are more engaging, but bear in mind they will be different in different markets. Second rule is to be open and transparent – there's no choice now anyway, but there's experience to suggest that consumers like to see companies taking risks and admitting failures and uncertainties. Rule 3? Without getting too deeply into the matter of values and frames, there was consensus that heroes and aspiration are still good ways in to a productive conversation. The last rule is being true to the brand – in tone of voice and also the kinds of claims made. Unilever and Cadbury have the brand heritage to have conversations with consumers that might still look questionable from – say – Jaguar Landrover or Exxon. Elephant traps to avoid included – doing nothing, doing lots but saying nothing ('greenhushing', apparently), lecturing, hectoring, and worst of all, waiting.
- Consumers have selective learning
- HSBC Green Sale might seem outdated now - too niche?
- Are some brands so strong they don't care? Or are products longer lived?
- Public / private partnerhsip can work. Eg: Cambs work with business on reducing traffic drive to work.
- Downturn opportunity - but can business really embrace it?
- Kingfisher experience in China - sell health, not the environment
- Waitrose: "on radar issues" (me, my family etc) vs. off radar issues (fish!) - require leadership
- Unilever & Cadbury "caring heritage" = brand spaces to go further
- Olypmics is a unique proposition - can't really find out what customers want until its too late - have to rely on others eg. WRAP etc.
- Helping customers reduce their main impacts. Eg: grown your own, energy efficiency etc. Bio regional / Kingfisher
- Talking about sustainability
- Lecturing the consumers
- Wait for the consumer
- Doing nothing. Ie. not leading (will catch you out at some point!)
- If you are not leading you will caught out
- "Green hushing" - hiding your light under a bushel.
- Looking for consumer benefits eg: better taste or saving money
- Making it aspirational - using heros. Eg: Kevin McLeod
- Brand is key to trust and credibility
- Using resonant proxies - heath, local, savings etc.
- Consumers like to see companies take a risk - they meant it
- Admitting uncertainty is positive - but not cluster bombs!
Green Deal: what we can learn from Kingfisher’s eco-home trial in Southampton? Chaired by James Walker, Eco Innovation Development at Kingfisher and Rod Pettigrew, HVCA
The Green Deal provides business and consumers with the ability to unlock demand and drive the growth of the energy efficiency market by providing a trusted framework and unlocking the need for upfront capital. Whilst this is an opportunity there are a number of challenges between a great idea and success in reality. Ensuring the market is unlocked will need support from the entire market from Government to charities, retailers to the trades and from energy companies to the finance market. The interest from the table demonstrated there is demand for the Green Deal and we all just need to make sure the detail is right.
- Local authorities will have a local agenda - removed opportunity for national retailers / brands
- May be too difficult to communicate proposition to consumers
- Danger of "creep" - consumers trying to justify painting walls etc.
- Balance is in favour of consumer protection. Is the market unlocked?
- Golden rule. Must pay back in less than 25 years
- Customer inertia / lack of inclination to think long term / lack of trust
- Government inconsistent policy - companies losing patience
- Government won't support communications - will companies be joined up?
- Identifying which category of people will be receptive to the green deal?
- Home base (only joking!). Kingfisher
- Leroy Merlin (heat camera to identify loss) and education resources.
- "Trust" is critical
- Don't define in "savings", define in "wastage"
- "Ownership" - Gov't? Other suppliers? Many suppliers?
- B&Q "job sorted" employing local trade
- Birmingham City Countil have pledged to invest all money from CO2 savings into the community
How can companies advance and optimise energy efficient product strategies that resonate with the consumer? Chaired by Simon Brown, Head of Strategy, Marketing and Communications at MITIE Asset Management
We asked the question ‘what really resonates with the customer’, is it price, environmental factors etc? The majority of consumers will use price as a determining factor above environmental issues. M&S have been able to successfully market their sustainability commitments to their customers and build a brand on quality. For many customers however, the terms ‘sustainability’ ‘green’ and ‘organic’ can almost be a negative. How do we promote sustainability measures to customers? By gaining emotional attachment to the issues around environmental factors and rebranding ‘sustainability’. Companies need to move with the trends, ‘carbon’ and ‘sustainability’ are no longer fashionable. Communication is lacking, customers need a better explanation of what it all means and how their actions/buying behaviours can affect the bigger environmental picture. We need to adapt our products in order to differentiate ourselves from competitors and ensure we communicate this to customers.
- Better products in the mix
- Trust & belief
- Move from sustainability being a fashion item
- Greenwash -> rebranding sustainability
- Attitude and behaviour
- Need to be emotive
- Communication is key
- M&S – no trust in utilities to deliver E/E
- Coca-Cola, BMW, Waitrose
- Focussing on carbon instead of energy efficiency
- Fashion led consumerism (e.g. carbon)
- Using terms ‘sustainable’, ‘green’. ‘organic’.
- More informative
- Building trust (e.g. M&S)
- Real brand trust
- Differentiation/competitive advantage
- Building emotional attachment with its consumers around green issues
Some are heralding the death of CSR, other talk of a new social contract for companies. What should we expect in 2012? Chaired by Simon Abrams, Client Service Senior Manager at Ernst & Young
We recognised key to managing sustainability in the future is to demonstrate how it brings real value by meeting customer needs. A number of companies were actively seeking to understand the needs of future customers, Sky, B&Q and others identified the use of specific stakeholder engagement activities with young people e.g. youth boards as a means of identifying product trends, values and understanding how best to communicate with this important group of future customers. This is key as the lack of trust in business is likely to be disproportionately with the youth who are more sensitised to social and environment issues. They are also likely to be most affected by the economic crisis so they are looking for authentic actions from companies not just lip service.
In order to address new and emerging companies need to demonstrate real leadership and authentic transformation. Anything else will be found quickly. Companies such as Nissan and Marks & Spencer have made authentic changes to their organisation. All the agreed identified that change needs to be introduced in line with the commercial grain of the business, otherwise it will be difficult to get change through. 'Ian Cheshire - stated that you don't want to blow up the business model'
- Commercial systems for reporting – reporting on whole carbon costs – which model do you trust
- Virgin/Kingfisher – What is driving young people – who will influence value in the future young people’s board/youth friendly businesses – market signals to drive change -> Different perspectives product is irrelevant
- What do they think so important
- Prove growth through sustainability
- Embedding values into the business – making it real part of the commercial plan
- Sky/Sky Skills Study
- Plan A: Embracing values through all actions
- Educating/working with consumers of the future – Veolia + others
- Nissan – electric car as a positive choice
- Kingfisher youth board
- Assuming sustainability is for the rich
- Just trying to be less bad
- Beware of unintended consequences
- Being clear on values “doing right thing” – moving from language of sustainability
- Working alongside/listening to young people – “B&Q youth board”
- Moving from doing “less bad” to real transformational change
- Need to work with the commercial grain of the business to make change happen – unless embrace won’t happen
Is energy policy getting more uncertain, and how should corporates respond? Chaired by Andrew Horstead, Utilyx
This roundtable considered the Government’s key policy areas; the CRC, Electricity market reform, the Green Deal and Feed in Tariffs. The table comprised end-users, service providers, charities and journalists covering energy policy matters for an international audience. We asked whether the Government’s direction of travel was right and whether its policy measures went far enough. We considered how important energy policy was to a business, what the key challenges were and how businesses were responding to the changing policy landscape. The table concluded that yes the policy direction was correct and was opening opportunities with senior stakeholders but policy complexity remains as key challenge and must be addressed to get business onside.
- Government policy is moving in broadly the right direction, but the way is is going about it is giving out the wrong message
- CRC is an incredible challenge and change to taxation has damanged the credibility of the scheme
- Lack of incentives for small / medium sized businesses - they can respond as nimbly as a larger organisation
- Solar industry will survive - right to make cuts and money had run out & costs had come down
- Internal disucssions to talk through the opportunities is a positive from the CRC
- CRC has helped to stimulate the debate about sustainability - the corporate discussion is more advanced as a result
- Look at the impact of energy prices on direct profit, rather than saying "prices will go up"
- Areas to focus on - Voltage optimisation, LED lighting, then look at infrastruture
- Chinese cleantech - aggressive renweable targets - good example of an international approach
- Green Investment Bank - has the potential to be a great success & much be allowed to speculate
- Carbon policy - should be simplified & joined up - e.g. Waste management
How do you engage shareholders on the resource efficiency journey? Chaired by Liz Goodwin, CEO, WRAP
Much of the discussion focused on how to overcome the challenges, which include ambivalence among shareholders and the mismatch between short investment cycles and the longer timeframes required to deliver significant change in resource efficiency. There may be opportunities for change if investors understand all externalities. Voluntary agreements were seen as a useful tool in changing behaviours. We also considered a more radical approach involving changing the rules governing resource efficiency. Visibility and transparency of supply chain activities was viewed as essential and M&S’s work in this area was praised.
- Customers don't necessarility care about sustainability
- Greenwash - PR hiding the details of the products
- Investment time frames
- Timeframes for changing business models
- Changing the investment rules - min standards, investment specs, who determins the rules?
- Complexity of vetting investments before they are made (personal and business investments)
- Internalising all external costs - would it make it make most business cases invalid
- M&S - visibility within the business
- M&S - working with the supply chain
- Historic Features
- Example of manufacturer who set a target for increased recycled content, which pushed up the price of recycled materials
- Half of waste to landfill - set yourself the challenge (WRAP)
- Focus on voluntary agreements
- New minimum standards for investments - resources, products
Sustainable consumption: drivers of change for maintaining natural capital/mitigating resource scarcity. Chaired by Ray Baker, Director of Group Corporate Responsibility at Kingfisher
- How to move to more sustainable products – who pays?
- Consumption patterns of consumers
- Incentives – lack of them to change/bring back
- Additional reporting requirement – how sell
- John Lewis: Looking at product recycling, from mattresses to TVs
- Spending more time reporting than doing the CSR “stuff”
- Collaborating with suppliers more
- Get the communication to consumers right
- Get clients to think about the end life of the product
- Improve information about product lifecycle to consumers -> equip to make decision
- Tell consumers about the good things – B&Q removed patio heaters from shelves
- Feeling good about purchasing – save money + good for environment
- Consumers are prepared to pay for quality – increase longevity
- Use sustainability reporting to engender competition
- Think about what you are going to do with the information before you ask for it
- Be more engaging with consumers about the fun stuff rather than just the sustainability indicators
Business Models: how business models will need to change as we move from incremental to transformational change, chaired by Peter Lambert, Deputy Chief Executive, BITC
The business models group’s discussion was wide ranging but centred around how to move horizons from the short term – internally with business leaders and managers ( especially in established often low margin businesses) and externally with investors, customers, suppliers. We considered what would help create the change in perspective, with a number of practical suggestions around capturing young peoples’ ideas innovation teams, test areas and risk sharing. We wrestled particularly with how to spread and sustain changes once made to ensure that solutions are not dependent on individuals but get into the mainstream. This brought us back to Ian’s points about the value of collaboration, committing to transformational change and a structured process to engage diverse teams from across the business re-examine current business models, with a series of extreme scenarios and work from the future back.
- How do you get mature businesses to start to look forward and innovate again for sustainability
- Converting the customer and sustaining it when people change
- Consider visioning process. Look long term and transformational rather than incremental (GREEN!)
- InterfaceFlor created a change in the contract carper market
- Heineken immersing senior directors in the issues created by superstrength lager produced a decision to cut the product
- “Forward Foundation” bringing chariatbel giving under one roof. Matching personal fund raising. Giving staff money to spend on a charity as part of their offer
- Suppliers buy-in and getting them to understand customer wants -> change business models
- Shortism & investor perception
- Create the small, in market, test. Prove it, then scale it (can be easier said than done)
- Predict the change that will impact on this business model and use that – e.g. anticipating cost pressure
- Use technology to connect with young people eg. PACT or spread betting on carbon footprinting
- Relooking at the company’s role in society
- Risk-sharing/partnering manufacturers and distributors
- Dedicate/allocate a percentage of staff time to innovation | Or have a risk budget | Or an innovations team (like Kingfisher)
- A “safe area” for experimentation is key – be it a fund, a team, a division, or ring fenced time. E.g. British Gas New Energy
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