Sustainability & Growth: How can big business achieve absolute decoupling?

Monday, June 07, 2010

18:00 - 21:30

This event will ask the critical question of whether our companies and economies can continue to grow without ultimately increasing ecological impacts. It will explore the relationship between our economy's cultural structure and the aims of the sustainability agenda. And explore the limits therein.

A number of businesses have recently announced ambitious plans to cut emissions, but they fall in to two distinct camps. One group are talking about absolute cuts and the others are talking about relative cuts - i.e. the second group are not pledging to cut their emissions at all, they are only agreeing to drive down the intensity at which those emissions are produced.

The question we need to be asking for our Scope 1, 2 and 3 emissions is can they be properly de-coupled from growth (the rate at which the services and products sold increases). There are other questions here around the incremental degrees of contentment that further growth brings and questions around the current model that values shareholder value over all else. But the main theme for tonight is: can businesses and economies continue to grow without a rise (and sufficient decrease) in ecological impacts.

Tim, who wrote the fascinating “Prosperity without Growth” and sits on the SDC, will be giving a snapshot of his thoughts on the topic and a feel for the alternative propositions. Santiago, VP, Brand Development at Unilever, will be explaining their view of the consumer business model going forward.

Speakers

Professor Tim Jackson Sustainable Development Commi...

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Santiago Gowland NIKE

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Steve Creed WRAP

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Round Tables

Built Environment

Sustainable growth: What does it look like for the built environment and how do we do it?

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The Real Estate table focused strongly on the 80:20 rule. 80% of the emissions attributable to the built environment relate to existing building stock. It was therefore pretty obvious that efforts should be focused on this, looking at energy efficiency retrofit and occupational behaviour. London is leading the country in this, with:

• a pilot project with funds of £20 million (made of CERT scheme money and a contribution from the LDA) which is deploying an integrated delivery model of basic energy efficiency retrofitting by borough, on a street by street basis. The focus is insulation, water efficiency and an adaptation risk (overheating and flood risk).
• a social enterprise in Croydon called Croydon Ark is also focusing on how to create the systems to promote re-use of construction materials, thereby reducing the embodied carbon in new build projects. It will act as a hub for collection of previously used timber, bricks, steels etc that can then be sold on for new projects.

We debated the mechanisms to achieve better general understanding of the need for more sustainable buildings and ways of occupying them. There was a strong view that regulation was not the only option, and that personal experience and recommendation through "word of mouth" could be more effective. There were risks with this, as this route could be potentially slower, and susceptible to being damaged, for example, in the event of poor execution of works, but generally people felt that voters respond more to carrots rather than sticks. The table considered that there was a currently a gap in understanding as regards the importance of systems analysis in shaping policy and policy implementation plans in relation to these issues. We need to deploy existing resources with greater ingenuity in order to get maximum benefit. For example, to develop more sustainable ways of living in areas there was a need to consider how to enable people to travel less by car, perhaps by promoting more of a mixed use approach to planning policy and considering how well these places were supported by necessary services - shops, doctors surgeries etc. Maybe we should move to have central London residential areas as car free zones? The two biodiversity experts on the table also pointed out the incoming focus on green infrastructure and that with the new PPS on climate change this will be considered expressly as a matter of course, albeit that some councils are already leading the way on this.

Supply Chain

Supply chain planning. How does planning have to change to ensure total supply chain Sustainability?

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June’s round table followed the keynote speeches which focused on sustainable consumption – the “elephant in the room”. So the topic focused on how companies are responding to the demands of customers to be more sustainable, where latest research shows that consumers are expecting their trusted brands to deliver – though they may not want to pay any more for perceived “sustainable” products and services. In fact there was a view that corporate are actually driving this agenda as sound business sense even without pressure from their customers

Many of the companies present had made good progress with their own organisations but the main challenge for most now was to take this drive into their own supply base.
There were some good examples quoted of using international initiatives to drive changes in supplier behaviour and performance.
- Sedex has ensured that suppliers globally focus on ethical standards, and is helping to ensure reduced risks and protect corporate reputations
- Standards such as FSC, UN Global Compact, ISO 14001, are also helping to compel suppliers to comply with wider standards of Sustainability
- Walmart and M&S’s Sustainability drives and the Supply Chain initiative of the Carbon Disclosure Project are in particular encouraging a wider range of companies to address their Scope 3 GHG emissions

These initiatives provide standards for assessing supply chain Sustainability but there are still wide issues concerning the consistency of these standards and particularly the availability of data. However, use of balanced scorecards and benchmarks is proving to be helpful in identifying priorities. A clear message from the companies present was to select and implement a pilot project and work in a collaborative, open and transparent way with the suppliers involved.

Stakeholder Engagement

Getting through to employees

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Thanks for joining the stakeholder engagement roundtable at Green Monday. It was certainly an interesting discussion that ranged all the way from the challenges of incentivising employee engagement all the way through to how we internalise the externalities facing business. Although I am sure what I have captured below isn’t everything we spoke about in relation to engaging your employees, hopefully it provides some food for thought.

Look forward to seeing you all at a future roundtable session.

• Provide information: by providing the right information about what the goals are and what you are trying to achieve you can enthuse those around you and also provide a rationale for why you are doing it
• Do some benchmarking: start the process with a questionnaire or some form of benchmarking to understand what your employees already know. This allows you to show progress as you move forwards
• Champion networks are not for everyone: for some organisations champion networks work very well, for others they can lose momentum. When setting up a network carefully consider how the role can be built into people’s jobs and make sure there is real commitment and follow-up
• Engage the senior team: ensure the senior team are on board. This will ensure that everyone is seen to be taking part and wanting to make this happen
• Build objectives into remuneration: by building in remuneration targets into your sustainability targets will help make sure they are met and employees are engaged in the process
• Crowd source solutions internally: don’t just limit ideas for how sustainability can be integrated into the business to the strategy or CR team. Get everyone involved in coming up with solutions – likely to have higher buy-in internally from all levels if everyone has been part of the process
• Communicate, communicate, communicate: tell people what is being done to encourage them to take part in the process – make sure the sustainability strategy moves beyond the CR / Sustainability office
• Give them the tools and permission to make the change: encourage the right behaviours through incentives (e.g. holiday rewards for cycling into work, subsidies for using public transport etc.) and provide the opportunity to make the changes by providing the right tools (e.g. videoconferencing, flexible working from home etc.)
• Creating a better life for yourself: show employees how making the changes can make a better life for themselves – show them what is in it for them

Carbon Strategies

Can UK domestic offsets be part of a robust offsetting strategy?

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Many UK companies looking to introduce carbon offsetting into their carbon management strategies ask the question ‘can we offset through UK project credits?’ The answer is, under all current standards and quality assurance schemes, No. At the present time, “offsets” which are generated by projects based in the UK are not generally considered to be robust, additional carbon emissions reductions. This is because the UK has a legally binding carbon emissions reduction target under the Kyoto Protocol and any reductions which occur due to project activity which takes place in the UK will automatically be included as part of the UK’s national inventory of Greenhouse Gases and therefore the reductions will have already been counted. If carbon “offsets” are then sold to individuals or organizations to counteract their carbon emissions then this carbon emissions reduction, or offset, will be “double-counted”.

However, there is some demand from the public and the corporate sector to engage with offsetting project activity which takes place closer to home where it is felt it may have more resonance with the company brand or customer base.

One way which was suggested to think about the problem was to pose the question: If you had a budget of £2 million to invest in carbon emissions reduction, what would you do with it?
There was feeling amongst the group that the money should be spent on getting your “own house in order” first, looking for the quick wins and low-hanging fruit wherever possible and where cost-effective to do so. But where next? Should an organization consider international, accredited carbon offset schemes, or look at spending the money externally, yet closer to home?

The group pondered the following question - If more emissions reductions would be made by investing the £2 million within the organisation’s local community than if it were spent reducing the company’s internal emissions, should that money be spent in the community? The majority said yes, it probably should. This was an interesting response as it externalizes emission reductions and suggests that it is, at least in theory, the right thing to do to invest available money where it can have most impact on reducing emissions.

The next question posed was, how did this fit with getting ‘ your own house in order first’? The debate moved on to trying to define ‘your own house’ for a company? Should this be its own four walls, the local communities in which it operates, its supply chain, the planet as a whole (which after all is the ‘house’ which needs to be put in order to solve the challenge of climate change)?

As you can see, we didn’t reach any conclusions on the night, but we all had food for thought…..

Finance & Corporate Sustainability

On and off grid, renewable energy financing

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Context: UK renewable energy target by 2020, EU obligations, UK Government intensive programme to stimulate renewable energy market

The discussion developed around the following:
 Renewable Energy – what are the challenges and opportunities for companies, households and other parties (“on and off the grid”) towards sustainability?
 What may stimulate the market and facilitate the UK journey towards a rise in renewable energy? Are there financial services fit for purpose?

Outcomes:
 Green Investment Bank – being an organisation with a £“x”-billions equity to provide financial support to low-carbon transport and energy projects like offshore wind farms, ports and advanced electricity grid. However, the role of the Green Investment Bank in the bigger game and how it will collaborate with the other investment banks is not fully clear, yet. It is even more uncertain how much, and from where, money will come- EU Bank Institution? – especially given the current UK and EU financial context.
 World and European Investment Banks, and other examples from European neighbour countries – which judiciously use the limited public funds available to mobilise private finance for investments to achieve a transformation to a low-carbon economy
 Carbon Trust - offering low interest loans to SME's in order to finance energy efficient investments
 A transparent and traceable audit of public and private green investments – to enable all the interested parties to better rationalise strategic financial decisions, and channel future investments in areas like energy efficiency, renewable energy and clean carbon technologies, whereas there are today uncertainties and risks associated with the future security of energy provision
 Capital allowances, pension and insurance funds – to incentive and help companies directly and indirectly to amortise investments
 R&D – the government has an incentive role, the investors have a corporate role guiding and funding R&D
 Increasing carbon prices – to be enforced to the consumers of traditional non renewable energy sources
 Local government finance – to enable Local Authorities to plan, manage and invest resources independently from central government in low-carbon housing regeneration schemes and communities projects

For future discussion:
 Green investment bank – clarity needed on how it would operate, or what it would invest in, when 2010 budgets are finally unveiled.
 Role of the Green Investment bank (and/or funds) vis a vis with the role of Carbon Trust
 Role of local government finance for corporate sustainability

Communications

Communicating complexity: How do you communicate complex ideas and challenges?

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The subject of debate for the Green Communications table was ‘How to communicate complex information about sustainability’. It was a fitting follow-up to the key-note debates over decoupling carbon from growth. Traditional marketing is essentially designed to drive growth by persuading people to buy more stuff. The kind of thing that brings Tim Jackson out in a cold sweat. But green communications also have a role in changing consumer attitudes and behaviours towards a more sustainable approach. The challenge is how to unpick the tricky sustainability rationale, and turn it into a sales message that competes for public attention in the mainstream.

The table held the collective might of four communications agencies, an ex-WRAP communicator, a film maker and Green Marketer, John Grant. Now there’s a group to crack a challenge.

Question one asked why we communicate the complex bits of sustainability at all. Responses came back about changing attitudes and behaviours, which begged the question of whether a technical understanding of sustainability principles is really the big barrier to achieving those things. Perhaps not – we don’t need to understand carbon concentration in parts per million in order to switch our TV off standby. Having said that, a public that is better educated on sustainability would presumably be one more open to actually doing it.

So, what are the options? The group came up with 5 principles:

1. De-jargonificate – strip out the jargon, simplify the language, use analogies
2. Personalise – make the audience the subject, relate the issue back to their life and lifestyle
3. Stories not stats – translate the science into a familiar context, and use examples of ‘people like you’ to bring them to life
4. Get creative – factsheets are informative but rarely engaging, use other media and interactivity to engage and inspire
5. Sizzle – sell the positive outcome of the process before you explain the process itself, that way you’re talking to someone who’s listening

CSR Reporting Best Practices

Great CSR Reporting: What do Investors need to know?

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The CSR Reporting Best Practice roundtable focus this month was on Investors and Shareholders; a key stakeholder and target group for CSR reports. What information are they looking for? What drives positive investment decisions? What is to be avoided?

The first discussion between our expert participants centred on the question of how much attention investors really pay to CSR reports and related issues? Are investment decisions really made on this basis?

While there is a widely held expectation that this increasingly will be the case, there is also a general perception that, in the mainstream at least, it is not yet. A number of niche “sustainability funds” do exist, and of course corporate performance in key indices such as DJSI and FTSE4Good is sought after, but as yet it is felt that investors in the mainstream do not base decisions strongly on these aspects.

A couple of insights point to a shift in this position:
- One of our participants noted that in a recent board level discussion on the topic, executive board members were pressured by non-executives – perhaps representing wider shareholders (?) – towards much stronger CSR commitment than originally preferred.
- Another observation is the Equity Finance businesses are nowe routinely analysing CSR commitments in making acquisition decisions over a 3-5 year holding period.

In the latter case, we can extract a strong insight that this analysis is less about proactive CSR strategy and more about business risk management – in order words, is this business managing well the risks that might upset the stated growth projections? Strong understanding of supply chain, resource and energy management issues all help to present the required assurance.

So, our first table output: Yes, investors are interested in CSR commitments, strategy and reporting, but this is less about the positive, proactive commitments that businesses are keen to talk about, and more about understanding potential business and reputational risks, and the steps being taken to manage them.

Moving on, we discussed the typical features of a CSR report that investors and shareholders are looking for – what are the aspects to effectively communicate.

Our best practice checklist:
- Review of real performance against stated targets
- Commentary on that performance with peer group comparisons
- A balanced tone, with objective assessment of successes and failures
- Contextualisation of targets and performance in terms of business materiality
- Clear linkage between CSR targets and business strategy
- Objective perspectives of external stakeholders and challenger groups (e.g. NGOs)
- Credible 3rd Party Verification of data and methodologies
- A simple, snappy summary that wraps up the story

The best CSR reports will deliver against all of these aspects, but many, even among FTSE 250 companies, still fail to effectively do so.

In our final discussion, we looked deeper at the key aspects of the CSR report most likely to elicit a favourable reaction from investors and shareholders, and of course those “no no’s” to avoid.

To really impress investors:
- Show real commitment from the CEO and board – both in the report and in actions. Investment is after all in the confidence of the business to do what it says
- Make sure that CSR is built into the business strategy, fully integrated and not a “bolt on”
- Look to the future as well as review past performance; targets should be linked to a strategy for achievement
- Be honest to address issues as well as successes – focus on what is material and communicate that you are aware of problems and tackling them. This is often as good as “success” in business risk terms
- Try to communicate in standard terms as much as possible – though several “standards” for CSR exist, it is difficult to stick always to any one of them as each business is different in material terms (unlike financial reporting). Nevertheless, aim to follow established practice where possible and give logical reasons for choices of format/measurement

.....and what not to do:
- The opposite of the above!
- Set unclear targets – What precisely are you measuring and why?
- Use unusual measurement units – Why are they chosen? What are you trying to hide?
- Focus overly on non-material “successes” at the expense of time spent addressing the key issues
- Get the balance wrong – either all data & no commentary or context, or all talk and no numbers

As usual, my thanks to all participants. I hope you enjoyed the discussion and got as much from it as I did. We will return in July to address the topic of Avoiding Greenwash.

Technology

The UKs Renewable Energy Strategy and Europes New 2010 Energy Policy

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The table was attended by participants from DEFRA, consultancies, engineering professionals, venture capital, academia and a green magazine. The news was that the EU council of Energy Ministers recently agreed to delay the introduction of the European 2050 Energy Roadmap. Originally this would have led to recommendations for the period 2010 - 2014. The Roadmap will instead be introduced in 2011 and extend to 2020, in alignment to the wider Europe 2020 strategy. Ministers are concerned about poor implementation of existing policies, although it is clear economic concerns are having an impact on deliberations.

REA reported that the UK RES Action Plan is due to be handed into the Commission at the end of June, leaving the new Coalition gov little time. The table discussed the UK's performance in a range of renewable technologies. Comparisons were also made to other EU countries who are making major progress. For example Sweden which will exceed its 50% target shortly, and Portugal who will exceed their 2020 target, despite their intense economic pressures. Germany was also discussed because of its interesting similarities to the UK.

REA discussed their UK lead for the pan-European REPAP project for the EC available at http://www.repap2020.eu/ which provides an analysis of where policy is falling short in the UK. REA pointed out that bioenergy was making up the bulk of existing renewables across most EU countries, including the UK and this needs greater political attention. A UK sustainability framework needs to be implemented as soon as possible and the UK industry is committed to high standards. The table also discussed energy efficiency and the importance of taking this agenda seriously. There was also concern to focus on areas where the UK could 'win', namely marine tech and there was an interesting discussion about the challenges and opportunities presented by offshore wind. There was a discussion about pv, although REA took issue with popular misconceptions pointing out that the UK has the 5th largest pv technical potential across Europe, and the success of UK firms in this area, despite the lack of a domestic market.

Sustainability through ICT

Cloud services and data centres : Ways to make them greener

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1. All things being equal private or public (PaaS, SaaS,IaaS etc.) clouds are more energy-efficient as a result of greater resource sharing.
2. However, it cannot be assumed that public clouds will not be powered by CO2 heavy sources e.g. see Greenpeace report on Cloud Services. Enterprises have transparency and control of their power sources.
3. Manufacture and design of volume servers has a big impact irrespective of their use privately or publicly. However :
- There is no information or disclosure requirement for embedded energy (manufacturing).
- Even with virtualisation many servers are running at low utilisation due to designs that do not allow for large amounts of memory thus reducing virtualisation efficiencies.
- Many servers (and other products such as laptops) are designed such that the rapidly changing processor/memory/board cannot be modularly upgraded from the slow-changing components(case, power supply etc.).
4. EPEAT is a promising global initiative (http://www.epeat.net) however buyer awareness is low.
5. The focus on data centre efficiency is starting to have some impact e.g. through consideration of running at higher temperatures, hot/cold aisle, PUE, power supply innovation outside of server design.
6. The data centre 'model' has arisen historically with zero consideration for CO2 impact and there may be scope for substantial innovation.
7. E-Waste continues to be a significant problem even after introduction of WEEE (due to bypassing) so there is potential for design improvements that increase traceability of servers and other products at end of life since it would also help 'unlock' the potential for safe employment in recycling plants in less developed countries instead of health damaging scavenging on e-waste dumps or expensive recycling in western markets. HP's project
(http://h41131.www4.hp.com/uk/en/citizenship/electronicwaste.html) in this area may also lead to benefits.
8. Technology is towards the beginning of the sustainable design journey so there is plenty of scope for innovation and progress if vendors, investors and buyers are prepared to pursue it.

Energy Effeciency

Can the CRC and energy efficiency have a social benefit?

Sustainable Transport

Connecting workers and work. What is sustainable commuting? What investment is needed in public networks and private transport?

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For many of us, commuting is the accepted down-side to work and may be a lifestyle choice. But do we recognise the disbenefits of commuting? Do we need to commute quite so often? And all at the same time?

1. Commuting is bad for families, commuters and businesses. Action is needed.
• Commuting is a major contributor to GHG emissions in the transport sector. The school run and onward journey to work creates stress and lengthens the working day.
• Commuting is expensive for the economy, requiring substantial assets to be maintained (at additional environmental cost)
• Commuters may equate commuting with a business-like attitude. Mindsets need to change – but how?
• People working from home or close to home are more likely to put in additional hours, may be more efficient and may have a better attitude to work.

2. The demand for commuting should be controlled
• There seems to be no natural limit to commuting other than congestion on the transport network. Therefore action is needed to deter or substitute for commuting
• Multi-occupancy of vehicles should be incentivised by employers and government (see notes of previous round-tables). Employers should give credit for cycling to work, eg through Oyster-style system
• The need for long commutes is largely created by employers that set up in cities and other locations distant from where workers want to live and can afford to live. Businesses have an important role to play in reducing the burden that commuting places on the environment through their choice of location.
• It is still relatively cheap to commute to work. Strategic pricing of season tickets may be necessary
• Restrictions on car parking space at work may be needed to trigger a change in mindsets
• Taxation is unpopular but effective above a threshold

3. We don’t always need to be in a common place to interact effectively with colleagues
• Video conferencing is increasing in quality and accessibility. In principle white-collar workers can be in touch with colleagues continuously via web-based voice and video systems. Investment by employers in communications technology is needed, with the cost offset by reduced office space – and this may be essential for recruiting and retaining staff in future
• Meetings in people’s homes could be a viable alternative to meeting in the office. Certain safeguards would be necessary.
• Understanding people’s availability is essential – it matters more when we can interact than how we do it. Availability info needs to be shared more efficiently than at present. Simple web systems may be better than Outlook
• Working at home can be less energy efficient (need to check the maths on the optimum balance between commuting and office working vs home working). Local social enterprise can help provide interaction and services necessary for effective working away from the office. Community spaces, underutilised in the week, could be made available.
• Workers need better information for more informed decisions about where and when to work. Government has taken the initiative in some respects but there is a great deal more to be done to support good choices

4. When commuting is unavoidable, flexible timing would benefit business, commuters and the community
• Commuting in peak periods increases congestion, delay and GHG emissions. Workers are incentivised to avoid peak periods by service pricing, but are constrained by rigid working hours (among other factors eg school hours).
• Giving control of working hours to workers offers the potential for greater wellbeing, cost reduction and efficiency.

ACTIONS
• Businesses have an important role to play in reducing the burden that commuting places on the environment through their choice of location, through incentives to workers and through investment in communications technology - with the costs offset by reduced office space
• Government - strategic pricing of season tickets may be necessary along with other tax-based incentives to reduce demand for commuting. Government should supplement and publicise the availability of key information for informed decisions about cost- and GHG- efficient working
• Workers should think about their options and the benefits of flexible working, and be open to changing entrenched patterns.

Next session on July 5th: Connecting customers and goods - What is sustainable shopping? What are the implications for retailers?

Corporate Strategies

Case study, Tesco: 100% Recyclable Stores with Zero Waste to Landfill

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The table this month was a case study discussion on Tesco Property Services’ development of the 100% strategy above.

The discussion was started by asking the group to name leading companies in sustainability with distinctive strategies. M&S, InterfaceFLOR, Guardian, SKY, GE were all mentioned and discussed. BP was named as a company that had first mover advantage ten years ago but had lost its way. The group questioned whether GE was also losing its way on Ecomagination.

Using SecondNature’s toolkit, the group compared some of the above companies’ strengths and weaknesses before turning to Tesco. Most recognised that “operational efficiency” is the “pie” where Tesco scores highest. An overview of the project to develop the 100% Recyclable Stores with Zero Waste to Landfill strategy and supporting business model was presented, which is currently being piloted. Constructive suggestions included linking the business unit sustainability strategy to a more distinctive holistic group sustainability strategy and, in turn, aligning this to the group business strategy. Two of the group were familiar with Tesco’s Community Plan but the table were asking whether Community Plan is Tesco’s Plan A?

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.