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?

Does UK manufacturing need more patriotism?

"Make it in Great Britain"  Credit: bisgovuk

At the EEF Manufacturing Conference in London today, Ed Miliband spoke about a need to be more patriotic about manufacturing in the UK.  Unfortunately for the Labour Party leader, protectionism isn’t as easy as it used to be – so how can we be more patriotic without violating our international trade agreements?

Suggestions from Mr Miliband and others include wider use of the “Made in the UK” mark, a greater effort to find acceptable ways for the government to give manufacturers more money (e.g. greater capital allowances), and even better education for the next generation’s workers.

The last suggestion holds considerable promise, though as it stands it is too simplistic.  Education focuses too often on learning what is already known.  Worse still, engineering is considered irrelevant to the country’s success by many, and anti-capitalist protests suggest that among the young, the whole idea of gaining personally by bringing innovation and growth to UK’s manufacturers and services is highly suspect.  By failing to educate young people effectively about the opportunities for social, cultural, and economic advancement for all (as well as individuals) that engineering, innovation, and enterprise bring, we are letting them down.

I recently visited a highly respected and academically league-topping independent school for girls whose syllabus in Design & Technology incorporated only cookery and sewing – not even covering food safety or textile engineering.  The idea that bright young people will somehow learn about innovation, engineering, and related subjects outside the curriculum is fanciful.  A few may be so lucky, but most will not stumble across the right sources of inspiration, and will presumably grow up considering technology to be wholly irrelevant to them.

What should we be doing?  First, young people need to learn about the mechanics of capitalism, and how money is used for investment, which can drive innovations and advancements that create jobs, better and cheaper products and services, and benefits of all kinds touching every part of our lives.  This sounds like a very basic lesson, but it is one that is clearly missing in the discourse of many young people today.

Second, young people – as early as possible in their education, i.e. primary school – should be introduced to innovation as something that they can get involved in, and where they can have impact.  First Lego League does this for children from the age of 9, involving them not only in Lego robotics (a good draw), but also in product and service innovation projects which have nothing to do with plastic bricks.  An engineer involved as a referee remarked to me recently that the youngest teams are often the best – and it’s important to capture their interest while they are still young enough to “think outside the box” relatively easily.

Third, and perhaps most difficult of all, we need to teach teachers about manufacturing and industry.  How can we expect them to impart an enthusiasm for an activity of which they have little or no direct experience?  How do we think they will answer their pupil’s questions?  They are no more likely to absorb this understanding by chance from their private reading and hobbies than their students are.

These days, many young people who go into manufacturing learn everything they know on the job, from their colleagues and superiors.  While this is an excellent way to learn, it is not adequate on its own – it ensures that firms carry on doing things exactly the same way they always have.  In order to innovate and compete effectively, manufacturers need employees who have a wider experience and understanding than they can get solely from studying traditional methods and practices.

What does this have to do with sustainable business, the subject of this blog?  For business to be sustainable, it must not rely on government support or protection.  It needs to be able to survive on its own, and to adapt to new conditions.  Ultimately survival depends on the ability to change.  Firms will not be able to do that if their staff think innovation is something other people do, growth is something legislated by governments, and that design and technology are about copying best practices that their elders pass down to them.  UK manufacturing has a proud tradition of radical innovation, risk-taking in investments, and visionary change.  If there is anything to be patriotic about it is this – as a cultural entity, UK manufacturing has led the world, and with capable people, can continue to do so.

Are companies that actively manage their environmental impacts worth more?

Waste heat is invisible to the naked eye but costly.

In short – yes.  They’re worth more money than those that don’t.  Regardless of your feelings about the environment, as long as you care about money, then you should be more willing to invest it in a firm that manages its impacts.

Some of you will say that of course, that’s because such companies know about regulations and meet them, so they face lower risk of fines or emergency costs.  That is certainly true, but it is not the main reason such companies are worth more.  Even without any fines or emergencies, those companies are likely to grow faster than their peers.

This is the finding of a recent piece of research from academics at the University of California.  They don’t look at why this would be so, but they do demonstrate that it works.  Companies that disclose their emissions aren’t just being “good citizens”, they’re also doing smart business.

In fact, there are two likely reasons for this – and both point to a conclusion that managing your environmental impacts will boost the value of your business. 

First, the group is self-selecting.  Those that benefit from reporting will do so.  That means the reports will almost always come from those companies that a) measure their impacts already, so there’s little extra cost in reporting, and that also b) will suffer no great embarrassment – in particular, it will be those for whom impacts are falling, or rising slower than the business as a whole is growing.

Second, the old saying “what gets measured, gets managed” is true, and this is especially true for cost areas like energy and materials.  Business leaders hate seeing cost per unit of output go up, because it means that they either need to accept less profit or charge more money.  When impacts are reported, they are usually directly connected to the use of resources – for example Greenhouse Gas Emissions relate to the use of fuel and power.  If the measures of consumption per unit of output go down, it’s good news – but no one will be working hard on the process of making that happen if there is no one measuring the result.

Should your firm report its emissions, or other environmental impacts?  My view is that this is the wrong question.  Yes, the research showed that this was associated with growth and value, but in my view it is not the reporting itself that generated this – it is the act of measuring impacts and thinking about cost-effectiveness that led to these firms outperforming the markets.  Because they were in a position to manage their costs down, they thrived.  Companies that measure their impacts will manage them better.  Managing impacts drives company value.  The reporting was just a signal to the market.

Would you like to explore how managing your firm's impacts could boost your growth and increase value?  Contact Julia at julia@jlsbm.co.uk, or (07766) 333864.