Sustainability – great engineering isn’t enough

I’ve enjoyed reading Jim Stengel’s bestseller Grow, in which he explains how pursuing great values is critical in the game of trying to grow a business.  He shows some credible evidence – does this mean that sustainable approaches to business aren’t important to growth after all?  Are values all that matter?

In fact, much of his argument sounds like a sustainable business story, but with different language.  In essence (and I don’t do justice here – read the book) he’s saying that if the people involved in your business are all on the same page, engaged, and positive about your mission, you’ll do well.  And these are the very qualities that are critical to a business on a sustainability path.

Great engineering, fully engaged kids.  Credit: Extra Ketchup

The journey towards sustainability needs to be part of the CEO’s vision – but it’s not something that can just be imposed, like an ERP system.  Employees, suppliers, customers and partners all need to be engaged and positive about the sustainability mission.  They all need to understand what it really means, and agree on where that puts the priorities.  You want people to be so engaged and committed that there is no temptation to game your measurement systems, or to undermine outcomes for the sake of attention or status.

Business values and stakeholder engagement often receive too little attention in attempts to create change towards a more sustainable business model.  No doubt this is in part because the phrases are so clichéd – of course we’ll do stakeholder engagement, this is part of our core values.  Engagement is a bolt-on “done” by some department or external expert.  Values are a given.  It’s hard to think about them in a way that is wholly integrated with the sustainability journey.

The struggle to give this “touchy feely stuff” enough attention may also be influenced by a tendency for the engineering approach to sustainability to take over.  Because a firm needs systems thinking, robust measurement, and a sophisticated understanding of process technologies (in the strict and loose senses) to identify problems and solutions, this is naturally going to be the dominant mode of thinking about the change process.  But change involves people, and their behaviours and relationships are not so easily engineered. 

Stengel isn't really talking about sustainability, but he does seem to have an insight into part of the solution to this dilemma.  Any company that feels stuck on its sustainability journey even though it has a great understanding of where it's going may do well to ask it's stakeholders - are we all moving together?

Is your firm safe from oil price increases?

There is a story about two hikers in the Rockies who spot a grizzly bear, as species known for its aggression towards humans.  As the bear charges one hiker turns to run, but the other sits down, unpacks his trainers, and starts unlacing his boots.  “What are you doing?” asks his companion, “you can’t outrun a bear!”  He replies, “It’s not the bear I’m trying to outrun.”

Monthly oil price spot.  Credit: TomtheHand/Wikimedia

Many commentators are forecasting oil price rises as demand from the developing world increases post-recession, and as supply from Saudi Arabia diminishes.  Rises of around a third are bandied about, and greater increases are not out of the question, over a vague time period but certainly during this decade.  As repeated economic squeezes come, how will you stack up against your competitors?

If you use oil-derived products for heat, transport, or lubrication, you will of course see an increase in these costs.  Your suppliers will see their costs rise, increasing your input prices, and your customers will similarly feel the pinch, reducing their margins and provoking them into looking for savings up their supply chain.  End customer demand should also decline as fossil fuel prices eat into disposable income.  In other words, we would be in for another recession each time oil prices spike.

As it looks increasingly likely that this is the sort of future we have to look forward to, many firms are looking at ways of freeing themselves from oil-derived products in their processes and supply chains.  This is no easy task because there are still no economic substitutes for oil in most applications.  However, as we know from the recent global recession, keeping ahead of the competition on cost can be a matter of company life or death.

In the search for practical ways to prepare for volatile and/or high oil prices, here are some of the approaches that firms small and large are already pursuing:

• Supply chains: redesign of distribution e.g. route planning, creating more localised supply chains, optimising vehicle technology and driver behaviour
• Products: Making products more fuel efficient in both production and use
• Systems: Identifying low-value-added uses of oil and designing them out of the business model
• Resource stewardship: waste elimination and recycling
• Substitution: identifying those uses of oil for which cost-effective substitutes are now or will soon be available.

Tackling these issues now will make your firm more resilient during periods of oil price volatility.  While no firm needs to be best in class in every area, it does need to be better than its competitors overall when the economics squeezes come.