5 hurdles your organization might face in its quest to become more sustainable
Come January, many people strive to better themselves. But what self-improvements can companies undertake? Below we describe five hurdles your organization might face in its quest to become more sustainable – and, the strategies that can keep you from stumbling. We reviewed the literature on factors that can hinder sustainability; and then interviewed professionals to see how they dealt with these issues.
1) Your company is older:
Firms that have been around longer (the literature says about eight years) or have older plants/equipment often incur higher costs to meet new social demands. Older firms also suffer from less flexibility in adapting to social change – effectively, a corporate hardening of the arteries (Cochran and Wood, Pennsylvania State University).
But if your firm is older, your company has withstood the test of time. You know how to remain relevant. Your firm is probably good at what it does, but you might lose your competitive advantage if you don’t embrace changing stakeholder preferences. Two tips for overcoming this sustainability roadblock are:
a) Make your age an asset: Leverage your robust financial resources, knowledge and expertise to meet stakeholder needs. For example, older companies often have well-established relationships with a loyal consumer base. This base can become a reliable market to introduce new or tweaked products that incorporate business sustainability values. Older firms may have relationships with key influencers, funders or advisors, all of which can be leveraged to help infuse sustainability into the firm.
b) Work through HR: To overcome the “old guard” mentality, hire with business sustainability in mind. The pool of potential hires with this mentality is getting larger as Generation Y enters the workforce. Also consider creating a new role dedicated to business sustainability. The person in this role can focus on garnering top management support, overcoming potential inflexibility or complexity and seeking opportunities for change.
2)Your financial performance is poor:
Companies with fewer financial resources than others in the industry generally can’t take the risk – nor do they have the capacity – to take on new initiatives like sustainability. Firms that are in financial trouble may have few slack resources to make discretionary investment in either philanthropy or long-term, strategic sustainability initiatives (Moore, New Castle Business School).
Yet contrary to popular belief, companies should not view social responsibility as a discretionary investment: firms with few resources should embrace sustainability if they want to survive. Bear in mind that a tight financial situation may be symptomatic of the need to innovate, a need that can be fulfilled through new, cost-saving sustainability initiatives. If you’re tight on slack resources, start working smarter:
a) Look for low-hanging fruit: Start with quick wins such as waste management cost-savings in your operations. Or, earmark modest funds for energy audit, which will yield enough cost savings to offset the cost of the audit and more.
b) Partner across sectors: Reach out to non-governmental organizations. They can give support to companies who want to get started on business sustainability. Such support can include providing an educational lunch and learn or undertaking a quick review of sustainability strengths and gaps. Partnering can also extend to collaborating with academia. Some universities with business sustainability programs are willing to offer free or low-cost co-op students to take on sustainability initiatives.
3)Your firm isn’t in the spotlight:
When the public knows your firm is “doing good” it can reward the company through brand loyalty and investment. Making socially responsible initiatives widely known is a key ingredient in reaping value from business sustainability.
But the answer to this problem is not indiscriminately publicizing your responsible initiatives: the public is often confused and might attribute your communications efforts to greenwashing. It’s crucial you think carefully about what you communicate and at what level of detail. A couple ways to thoughtfully get the message out are:
a) Back it up: Be sure to act first and then publicize it. In order to avoid the green-washing problem, it is essential to establish a track record before taking it to the public.
b) Build internal credibility: Engage employees in sustainability initiatives so that they become your spokespeople. When employees identify with your company and feel passionate about their jobs, word of mouth will flow to consumers and other stakeholders, which then becomes a form of free publicity.
4)Top management isn’t invested:
When top management has a lower equity stake in the firm, this results in weaker alignment between managerial actions and the company’s long-term need for business sustainability. If managers are rewarded only for short-term performance, they will often make short-term decisions. With little skin in the game, managers lack the incentive to innovate and respond to changing environments (Johnson and Greening, University of Missouri-Columbia).
To get over this hurdle, think about the attitudes that different managerial incentive structures foster. An ideal incentive plan would encourage risk-taking, accountability and collaboration. Two ways to develop such a plan are:
a) Frame sustainability as a leadership-building opportunity: Allocate a percentage of every top manager’s time to working on sustainability initiatives. These types of projects call for “out of the box” thinking and creativity, allowing managers to develop and demonstrate their leadership skills. Managers can even put achievements in these projects on their CVs or LinkedIn profiles, which would provide them with an opportunity to differentiate themselves.
b) Take a cross-functional approach to business sustainability: Refrain from overly assigning business sustainability responsibilities to one particular department. Instead, take a collective approach. Tie business sustainability to the incentives of the entire management team. For example, to encourage health and safety one company built into its compensation plans that the entire management team would lose 20 percent of their bonus if a fatality occurred.
5)Business sustainability doesn’t have an owner:
Firms that don’t have a senior executive responsible for business sustainability will find it harder to make well planned, integrated changes that can meet the business sustainability challenge (Bueler and Shetty, Utah State University).
The following tips can help make up for the lack of senior executive accountability for business sustainability:
a) Form a cross-functional committee: Form a “green team” that can take on simple quick wins. Once top management sees the costs saved or value generated from low hanging fruit, they will likely buy into the idea of assigning a senior executive to this area.
b) Add business sustainability to an existing staff function: Make business sustainability planning a piece of an existing staff member’s job, ideally someone in operations. Give this person oversight over the business sustainability area and ask them to report cost-savings and revenue generation to the top management team.
These are just a few potential roadblocks to business sustainability and strategies for overcoming them. For a longer list and more ways to mitigate these five roadblocks, see NBS’s Facilitators and Inhibitors Tool, to be released later in 2012.
Please note that this article is drawn from Tobah’s graduation work.
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