Sustainability makes business sense

Davide Stronati
13 November 2014

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Many of the best-performing companies in the industry have gained their edge with the aid of a secret strategy, sustainability, writes Davide Stronati.

Sustainability makes you more innovative, more efficient, more resilient and more competitive. This was the recurrent message delivered by some of the biggest, most commercially astute organisations in the infrastructure business at a half day conference hosted by Mott MacDonald Chairman Keith Howells in London on 4 November.

"Why aren’t more companies doing these things? Sustainability pushes us out of our comfort zone, requiring critical self-analysis and integrated thinking. It challenges the status quo and requires future scenario planning" 

When client organisations Anglian Water, Crossrail, The Crown Estate, Heathrow Airport, High Speed 2, Lend Lease, Highways Agency and Network Rail, global asset managers First State Investments, contractor Skanska and manufacturer Interface stand up and tell you that sustainability is fundamental to their success, you need to sit up and take note. Each company told a different story but there was a consistent point: sustainability is good for business.

The world is under pressure from numerous directions – population growth, financial constraints, resource scarcity, social justice, climate change and ecosystem fragility. These are factors that all businesses feel in some form and need to be addressed. At the same time, it is clear that every decision we make has consequences – social, environmental, economic and reputational – that sooner or later impact all of us commercially.

Sustainability offers solutions to the pressures facing our businesses. And it offers the means to ensure that the consequences of our decisions are positive, value-adding ones.

Speakers at the conference highlighted four ways in which businesses can use sustainability to become stronger.

1. Cut carbon to cut cost

Capital and operational carbon are proxies for natural resources and energy use, and therefore cost. Designing to minimise whole life carbon will automatically produce an asset that is less expensive to build and run. It’s a simple equation. And there are wider benefits as low carbon projects tend to employ construction techniques that make them safer to deliver; because they are using fewer resources there is less road haulage, noise, vibration, air pollution, and so on.

2. Use new technologies to enhance performance. 

With increasing frequency, technological innovations emerge that enable the creation of new customer services or radical alternatives to conventional solutions – for example by increasing the capacity, service life or safety of existing assets. The challenges are in accepting the new, understanding the potential threats and opportunities, determining how and when to invest, managing the risks, and communicating with staff and customers to bring about behavioural and cultural changes that enable the full potential of the technology to be realised.

3. Understand your vulnerabilities. 

To meet the needs of a growing and more demanding population, delivering ever better service quality and reliability at an affordable price, infrastructure systems are becoming increasingly sophisticated and interdependent. Our changing climate is placing unprecedented strain on infrastructure. To minimise risk of cascade failures and profound business disruption, it is vital to understand vulnerabilities and interconnections, protect where it is cost-effective to do so and, where you can’t, plan to fail safely and recover quickly. Assuring business and service continuity in the face of climate change requires new cross-disciplinary, inter-company and inter-agency relationships to be built.

4. Develop stronger schemes by adding social and economic value. 

Creating opportunities for and access to employment, entrepreneurialism and trade, healthcare and education, travel and leisure; stimulating local regeneration and economic growth; promoting safety, health and wellbeing – these are some of the measures of value that are now being used alongside traditional cost-benefit assessment criteria. Capturing this value can dramatically alter public attitudes and investment decisions, unlocking funding that would conventionally be denied. Modifying scheme designs or business plans to deliver enhanced social and economic value is frequently cost-neutral or cost saving.

Why aren’t more companies doing these things? Sustainability pushes us out of our comfort zone, requiring critical self-analysis and integrated thinking. It challenges the status quo and requires future scenario planning – something that our industry is not good at. Driving sustainability to strengthen a business can involve difficult decision-making, not always based on evidence but often on gut-instinct. Visionary leadership is needed at the top of the organisation to empower new thinking from the individuals within it.

Speakers at the conference offered the following wisdom:

Scrutinise why you do things, not just what and how. Be clear what your core values are and be consistent in all you do, right the way through your supply chain. That contributes to a level of integrity that makes your services or products more desirable to customers, helps you attract and retain talent, encourages the best suppliers to work with you, improves efficiency and reduces cost. Ultimately it increases your market share because people will like what you do.

Set audacious goals. Companies that have used sustainability to achieve the most dramatic business improvements are those that have shaken free of ‘current’ thinking and set radical goals. Instead of asking ‘what do we think we can achieve’, they ask ‘what would we like to achieve?’ They then create simple, transparent means of measuring performance, incentivise dramatic outperformance, and fairly share risk to encourage innovation.

Challenge your supply chain. Sustainability isn’t a top-down thing. Every product or service supplier is a ‘R&D centre’ and a potential provider of innovations that will add efficiency. Specify the outcomes you want to achieve, not processes you want to follow or the details you expect in your design. Set ambitious goals, then empower your supply chain to pursue them, providing reward for doing so. It is about integrating the supply chain in your business strategy and delivery model. Occasionally value is gained in spectacular leaps, but small incremental innovations are equally important in changing the game.

Integrate sustainability into business strategy and execution. Sustainability is all about integrated thinking – opportunities, interconnections, risks, solutions, impacts. It improves efficiency, productivity and value. It supports and enhances the governance systems most companies already have in place. The organisations that have used it to strengthen their businesses have aligned their values, mission and goals with sustainability.

Use sustainability to enhance your market credibility. Investors are looking for transparency and responsibility in the way companies are managed. Sustainability is an indicator of good stewardship. Companies that score high for sustainability outperform those that score low – they achieve better growth and profitability – and can borrow capital on better terms. Sustainability is therefore something that every CFO should embrace.

Thanks to all who contributed so candidly and generously to the conference. More detail about the day, thoughts and advice from each of our speakers will be published in a special report at the end of November: www.mottmac.com/sustainability.

·Davide Stronati is group sustainability manager at Mott MacDonald