Ladder to change

Dr Paul Toyne of consultancy Article 13 looks at the findings of research into new ways of driving sustainability

Today the majority of the FTSE 100 publish reports on corporate social responsibility and the process of research for such reports can be very enlightening. Risks and opportunities are identified, and targets for improvement internally discussed and publicly stated.

The reports provide a public statement that can be used to develop investor relations, manage enquiries from the supply chain and from customers. Some cynics dismiss these reports as simply greenwash and a PR ploy. Is this unfair?
In its latest report Business Unusual, Article 13 identified a handful of companies from the FTSE 350 that recognised some of today’s business-critical global issues (see below) including environmental issues – and were taking action to address them. The research analysed published annual reports of the FTSE 350 companies for evidence on how they are tackling these global issues.

Eight business-critical world issues

  • Governance (transparent governments, fair and just laws, reduction of bribery and corruption).
  • Technology (access to, and application of technology).

  • Community (individual versus community versus global).
  • Health (provision of health services, access to adequate medication, disease prevention).
  • Waste (reduction of waste, re-use and recycling, safe treatment and disposal of waste).
  • Water (water scarcity – recycling and re-use).
  • Sustainable production and consumption (responsible consumerism).
  • Climate change (energy efficiency and reduction, lowering carbon emissions).
    These eight issues were identified by experts in business and sustainability and are part of a larger list that included amongst others education, poverty and conflict.
    A new way of doing business

    The results, based on the evidence collected from a more detailed review of the apparently most active 40 companies, identified ten companies which were taking initial steps to transform their business to deal with business-critical issues.
    Innovations leading to business transformation may well be the key to a new way of doing business, because the people within the company recognise the need to develop strategies that address the relevant business-critical world issues in order to maintain a sustainable business.

    It may be enlightened self-interest but it can lead to social and environmental improvements or even innovation. Businesses shown to be innovating in this field included Anglo American, BT, Waste Recycling Group, Scottish Power, and Kingfisher.

    Sustainable consumption and production

    Kingfisher, which own B&Q and other home improvement companies, is an interesting case study to profile as it is responding to the pressing sustainable consumption and production agenda. This recognises that society is exploiting the environment at a far greater rate than it replenishes itself and that there is a need to change consumption patterns and consumer habits. So what are the drivers for change and what are the business benefits for Kingfisher?

    B&Q’s progressive environmental policies were driven by not knowing where it purchased timber – adopting a sustainable timber-supply policy in the 1990s was crucial to addressing this business critical issue.

    “The cost of change far outweighed the costs of our supply chain collapsing and the bad publicity it would attract”, says Dr Alan Knight, head of social responsibility at Kingfisher.

    When Kingfisher, in 1998, bought an initial stake in Castorama, it realised it could not be judged solely on B&Q’s standards and that other companies in the group would need to respond to enquiries from investors and journalists. This meant that the company needed to be aware of the impacts of its operations within the group. Another driver was the growing recognition for a co-ordinated approach across the whole business on issues – such as the sourcing of raw materials – that affected the company and the long-term sustainability of its supply chain.

    Effective management

    Kingfisher recognised the need for an effective management process. With this in mind it has developed a ‘Ladder’ management model structured around a set of business-critical issues, in other words a global business agenda translated into the specific strategic challenges in the European home retail market.

    There is a ladder per issue per company. Each of the four rungs of the Ladder represent how the company is responding to the specific issue. They range from the bottom rung – managing the risk, to the top rung – demonstrating leadership. Kingfisher’s approach, published in detail in its Plan for Corporate Social Responsibility, is explicitly designed to enable different businesses within the group to innovate independently.

    The state of the world’s forest, reducing toxic components in paint, and improving working conditions in overseas suppliers were the top three of 12 issues identified through a business-wide staff consultation over a year. The results to date have enabled the organisation to share and report on best practice, so encouraging employees’ creativity to think (and realise) the unthinkable.

    An example of the Ladder in practice is the Climate Change Ladder for Castorama in Poland where one store is fuelled by

    methane gas emissions from a landfill site.
    A sustainable competitive edge

    The test for Kingfisher is whether these immediate successes can generate a step change from a price-focused retail tradition to a responsible and sustainable competitive edge.

    Article 13’s research reveals that the greatest potential for business transformation and competitive advantage lies with those companies that:

  • have a service which significantly impacts on the environment or basic human rights ;
  • generates value through consumer brands, in particular in sectors with strong NGO pressure, such as oil and gas industries, food and clothing retail sectors;
  • are seeking to access new markets and build a licence to operate; and
  • are dependent on technologically -advanced solutions.

    How many other companies facing similar business pressures begin the same transformation process remains to be seen.

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