What do a tire company, yogurt company, and luxury goods producer have in common? Five practices to reduce waste, improve reputation, and increase revenues.
December 7, 2012
Corporate Charters, Whale Fin Designs, and Selling Kilometres Instead of Tires
A tire company, a yogurt company, and a producer of luxury purses, perfumes, and wines. What do they have in common? Five visionary practices related to sustainable development that reduce waste, improve reputation, and increase revenues.
Christine Angelini, Evelyne Lombardo, and Isabelle Pignatel (all of Euromed Management) studied the activity and sustainability reports of France’s 40 largest companies according to market capitalization. This group is known as the CAC 40 and is France’s main stock index. The researchers analyzed how these large companies managed their sustainable development strategies to meet new international standards for greenhouse gas emissions (GHG).
The researchers found every CAC 40 company had adopted some form of GHG management strategy as a result of significant media exposure and resulting public pressure. Yet, the extent to which the companies embraced sustainability varied significantly. The researchers categorized the 40 companies into three levels reflecting their commitment to sustainability: conformist, engaged, and visionary.
Conformists, Engaged Firms, and Visionaries
Conformist companies implement basic environmental practices for compliance. They meet legal requirements for GHG emissions but that’s all.
Accor, BNP Paribas, Crédit Agricole
Engaged companies undertake sustainable development more proactively and actively seek to reduce their GHG emissions. They voluntarily implement management systems such as ISO 26000 or participate in sustainability awards and indices such as the UN Global Compact.
Air France-KLM, Air Liquide, Alcatel-Lucent, Alstom, ArcelorMittal, Axa, Bouygues, Carrefour, Dexia, EADS, Essilor International, France Télécom, L’Oréal, Lagardère, Peugeot, Renault, Sanofi-Aventis, Total, Unibail-Rodamco, Vallourec, Vinci, Vivendi.
Visionary companies are unsatisfied with simple environmental metrics or reports. They go beyond laws and voluntary standards to implement innovative practices that create value for the company and benefit people and the environment. This way of viewing the business involves new methods and processes that produce little or no GHG emissions.
Visionary companies develop their own systems for setting and measuring sustainable development goals. Danone, for example, created its own management tool called the Danone Way. The Danone Way is at once a charter, code of conduct, and self-assessment tool that integrates CSR into every business unit. It enables business units to assess performance in the areas of quality, ethics, management, and environment, to identify how improvements can be made and to draw up relevant action plans. It is not just a reporting mechanism for corporate headquarters (although it serves that purpose, too). Conceived in 2001 to help engage Danone’s 90,000 employees, including 28,000 in China, around a common culture, the Danone Way is now evolving into the Danone Way Ahead.
2. Eco-Design and Biomimetic Design
Eco- (or Green) Design refers to the practice of designing products and services to meet higher environmental standards. Luxury brand LVMH, for example, established eco-refills for its perfumes, saving nearly 60 per cent of its energy and resource consumption compared to a standard bottle.
LVMH was also one of the few companies to implement biomimetic design, or design based on natural processes. Their luxury yacht, Breathe, takes inspiration from whale fins to increase the boat’s stability.
3. Service Economy (or "product servitization")
Service economy (sometimes referred to as “functionality economy”) refers to providing customers with a service, not necessarily a product. Global tire producer Michelin created a program called Michelin Fleet Solutions to serve large fleets of at least 200 trucks or buses. Based on a new business model, the program transfers responsibility for tire maintenance from the customer to Michelin. Customers do not buy tires from Michelin: they pay a fee for use and maintenance of the tires and are billed according to distance traveled.
Once the contract is signed, Michelin takes care of everything: selection and provision of tires, inventory management, maintenance, replacement, and management of the tires at the end of their useful life. For billing, Michelin invoices based on the number of kilometers traveled, and the two parties commit to a long-term contract – typically three to six years.
With this new business model, the interests of all parties converge towards increasing the life of the product. The value for the customer lies in the company’s expertise and service rather than in a disposable commodity. The program, however, requires a high degree of coordination. Michelin manages the tires of more than 300,000 vehicles and coordinates activity among 800 in-house and 3,500 external stakeholders.
Dematerialization refers to the practice of replacing a product with a substitute that fulfills the same need. For example, some companies' “Green IT” programs reduce paper use by replacing paper documents with electronic ones. Companies can reduce the amount of energy they consume and greenhouse gases they produce by traveling less and prioritizing videoconferencing.
5. Circular Economy
Creating a “circular economy” refers to keeping waste out of landfill and finding ways to use it as inputs for future business processes. Since 2010, LVMH has used a platform developed by Cedre, the Centre for Documentation, Research and Experimentation on Accidental Water Pollution, to sort, recycle and recover waste. This platform deconditioned obsolete packaging articles, outdated alcoholic products, advertising materials, testers used in stores and empty containers reported by customers in store. In 2011, the platform processed 1,300 tons of waste, a volume increase of 30 per cent compared to 1,000 tonnes in 2010, and was able to give glass, cardboard, wood, metal, plastic, alcohol, and cellophane to a network of specialized recyclers.
Guerlain, one of LVMH’s brands, invites its customers to bring their empty products into shops in Paris for sorting and recycling. This eco-friendly action is facilitated in the shops through a dedicated display stand and client communication.
Are You Conformist, Engaged or Visionary?
What’s your company’s approach to sustainable development? Consider taking a more proactive, innovative approach to sustainable development and you could find great opportunities to grow your top and bottom lines.
Angelini, C., Lombardo, E., & Pignatel, I. 2012. Les pratiques environnementales au sein du CAC 40 : un regard sur les entreprises visionnaires. Revue Française de Gestion, 222(3), 35-54.
This Research Insight is based on an academic article published in a French management journal. Identified and summarized by Marie Demode and the REDD team (NBS’s French office in Montreal), this RI presents the unique perspective of French-speaking sustainability researchers and delivers business insights previously unavailable to the English-speaking community.
Future research could examine the visionary practices of French companies regardless of whether they are listed on the stock exchange. It could also compare sustainability practices between different countries or geographical areas.