Tuesday, January 3, 2012

Setting a Strategy for Sustainability

Why businesses should move beyond the duality of environmental concerns and making money to expos the false divide between environmental and business thinking. It makes the case that doing so is important in order for the organization to operate successfully, and thrive, in an increasingly resource constrained world.

by Christopher Gleadle, author of Sustainable Growth through Sustainable Business, and senior partner at the CMG Consultancy a sustainability performance agency. Follow Christopher on Twitter @cmgconsultancy; connect with Christopher on Linkedin; connect with him on Facebook.

Best strategies for a business are to make clear choices and the allocation of its resources, this being comprised of: ‘ the steady accumulation of frameworks promising to unlock the secret of competition advantage’ – Walter Kiechel: The Lords of Strategy, Boston MA – Harvard Business School.

A sustainability strategy forces choices delivering clear actions and positive outcomes for the optimisation of resources.

This leads to environmental planning and strategic planning working together in understanding what the year ahead and future horizon looks like in terms of accountability life cycle as well as developing clear key performance indicators and budgets. Additionally, it protects the company from random environmental projects creating a sustained process with intended actions, clear outcomes, and business benefits.

By transcending the duality of environmental concerns and making money, an organisation exposes the false divide between environmental and business thinking.

Whilst business is not typically attuned to the feasibility and necessity of triple bottom line reporting: that of economic, environmental and social, the real truth of the matter lies in using considered environmental metrics with a commitment to work in a three dimensional way. With sustainability and overall corporate strategy linked, sustainability is given visibility, as it becomes part of the overall planning, budgeting and accountability processes. Thus, the business can operate successfully, and thrive, in an increasingly resource constrained world.

Whilst financial projections are important for allocating capital resources, and understanding trend analysis, when looking at adding corporate value, by creatively reallocating resources; effective implementers dismantle the internal barriers to corporate strategy implementation, see: Sustainability – a new business paradigm – Christopher Gleadle

Therefore, it is essential that managers should forge much stronger links between corporate strategy and other key management processes to ensure that strategy results in meaningful actions. And, if business leaders, whether large corporate, or importantly SME, are to overcome biases towards immediate short-term solutions and switch to longer term thinking, then they will have made significant progress in adopting an attitude suited to the mitigation of increasingly complex and interdependent sustainability risks and developing a cycle of continuous improvement.

So, setting a sustainability strategy is a deliberate action to achieve deliberate outcomes – lower costs, drive innovation, team building, customer service, brand and reputation, sales and marketing, talent attraction, and competitive advantage. Thus, sustainability will help deliver the ability to beat the market.

Related post: “Lessons for Creating Your Sustainability Report: An EMC Case Study“, examines some of the issues and challenged that crop up in sustainability reporting.

It is important to understand sustainability addresses the three Cs of strategy – Competitors, Customers, Company.

Competitors – by driving innovation, meeting stakeholder expectation, and creating clear differentiation.

Customers – as pressure for meeting and delivering against sustainability issues transcends the supply chain, sustainability meets, and if correctly implemented, go beyond, customer expectation and improves service delivery.

Company – by reducing costs, improving team cohesion, talent attraction and driving innovation by removing the barriers to strategy implementation.

The deployment of a sustainability strategy also ensures verification of the actions to make outcomes provable in order to meet the strictest scrutiny, so adding the greatest value. This process of verification, by default, illustrates the interdependence of functional areas, and so expose and deliver greatest resource optimisation.

Furthermore, the market place is dependant on the state of the sum of previous events and winners are often accidents of history. Therefore, to beat the market, your advantages need to be strong, robust and responsive in the face of on rushing market forces. Sustainability is poised to become the biggest economic game changer over the next twenty years.

So, ticking boxes, and playing along with the market, will expose a position, which is not as strong as it may appear. And, where as it may seem that smaller and weaker competitors as well as new market entrants are not deemed a threat; if they are taking a divergent strategy, one that embraces sustainability – verified, robust and embedded into the DNA – they will come through and be the winners tomorrow.

Because sustainability connects, and exposes, the interdependence of structure, as well as conduct and performance; the company embracing sustainability will reap the rewards of positional advantage, by conferring and living by the unique benefits delivered to them. Many companies have to keep running just to stay in the same place – sustainability is a proven method that turns running into moving forward.

Sustainability, furthermore, breaks the cycle of typical strategy setting which applies much emphasis on the status quo – metrics extrapolated from the last three or five years. Whilst, sustainability is about gathering the backward looking metrics; once turned to face forward, gives insight into cost reduction and process optimisation for the future.

And, whilst most trends emerge slowly, or very slowly, sustainability is gaining traction across the globe, as its implications are felt across entire value chains. Companies tend to react to trends, or in the case of sustainability, continue waiting for legislation. Leave it too late, and it will become almost impossible to mount a strategically effective response and will deliver no influence on shaping change to your advantage.

The cost of delay is steep, both in terms of operations as well as lost market position. Yet, for companies who have got ahead on the curve have been able to tailor strategies to the new environment – and a great deal of economic research has shown – even through the recent recession – have taken a financial lead of competitors who have or still are ignoring the shifting market place.

Furthermore, companies that routinely go out of their way to experience the world from their customers’ perspective routinely develop better strategies. Sustainability is a quality stakeholder engagement programme of continuous improvement. Once embedded into the DNA of the company, the whole team shares and aspires to the ethos; customers and suppliers become involved in the process and support the strategy. This does mean that decision makers must be taken on the journey of sustainability; create experiences which help them instinctively grasp the mis-matches that may exist between what the new strategy requires and the actions and behaviour that have brought success up to this point. By connecting the board, senior managers and employees, there is a support base for influencers to feel connected to the strategy – as such; they may even become evangelists for it.

Following on, the strategy must be translated into an action plan (see: Developing a sustainability plan, and soon to be published – Sustainable Growth through Sustainable Business)

Ultimately, when setting strategy, the three questions that need answering are:

1) Does it increase innovation?

2) Will it create value?

3) Is it material?

The answer is YES to all three – as discussed in Sustainable Growth though Sustainable Business and at: http://sustainabledevelopment.thecmgconsultancy.com

Get proof, speak to customers, speak to suppliers; but when setting strategy – make sure the insights and capabilities underlying them are real and not just the result of some carefully manipulated PowerPoint engineering.

It is easy to think success will just continue. The challenge is to watch for signs to the contrary and use those signs as the catalyst for change. Winning, like sustainability, is a journey and not a destination. It is a cycle of continual improvement, so be clear and understand where you are on your strategic journey as a business.

It is important to always be thinking about profitable growth, but you also need to be thinking about the value of risk. Sustainability strategy directly linked to company strategy underpins the very essence of strategic thinking.

Are you protecting your strongholds? Are you thinking about how your competitors are reacting? Are you thinking enough about how to create, and not just capture, value as the market matures? How much risk is there in your supply chain? How much will it cost not to develop a sustainability strategy?

Sustainability as a strategy is about optimising resource use and allocation and understanding what is working and what is not. Notwithstanding that, what does working really mean? Sustainability breaks down and modulises what is working so you can see what it actually looks like, what it means and what costs can be stripped out and processes optimised.

Sustainability is about collaboration, skills development, innovation and optimisation of the triple bottom line. Sustainability helps and guides to get specific about what you have the ability to shape, what points of influence you can begin to put in place – sustainability is invaluable.

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