The new business environment
Sustainability can work seamlessly and save money if it is linked directly to strategy, says a Cass study. Jeremy Hazlehurst reports.
For almost 70 years the fruit-juice maker Ribena had used British blackcurrants in its drinks. So rather than look abroad for extra supplies when mild winters made harvests shrink, it set up the Blackcurrant Breeding Programme with the Scottish Crop Research Institute to develop more robust strains. And in 2007 Ribena - owned by GlaxoSmithKline - began using two of those new varieties, Ben Vane and Ben Klibreck. It is a perfect example of thinking about the triple bottom line: the planet (in this case, reacting to climate change), people (safeguarding farmers' jobs) and profit (protecting the supply chain).
Most businesses these days talk about corporate and social responsibility (CSR) and sustainability, but often fail to turn words into action. "There are a lot of companies that have pressure from stakeholders to become more sustainable but there is also a lot of concern that sustainability or CSR discourse or practice may be only window dressing or greenwashing," says Jean-Pascal Gond, Professor of CSR at Cass Business School.
In fact the reason CSR is hard to integrate is because it is hard to do. Why this is and what to do about it are the subjects of a new paper, Configuring Management Control Systems: Theorising the Integration of Strategy and Sustainability,* co-written by Professor Gond.
Barriers to integration
If a business wants to become more sustainable, and to ensure that sustainability issues are part of its core strategy, then it has to ensure that CSR is not relegated to some backwater. Managers must take sustainability seriously: management control systems - the way information is gathered to evaluate an organisation's performance - have to interact in the right way with the control systems used to evaluate sustainability.
"If things are not integrated it [CSR] may remain very superficial," Professor Gond says. It's all too easy for sustainability issues to remain "peripheral and decoupled from core business activities and fail to reshape strategy".
The paper identifies three barriers to integration. First, technical barriers: for example, if the data gathered by CSR teams is not compatible with data used by mainstream managers. Second, cognitive barriers: some CSR employees have no training in finance or management and cannot fruitfully interact with people in the rest of the business. And third, organisational barriers: if CSR teams are located in PR departments and required to create one report a year, they cannot influence strategy.
One way to change things, says Professor Gond, is to concentrate on the executives. Find out who really enacts strategy and give them CSR goals. "An organisation typically has lots of management control systems, but to change things you need to focus on very few of them," says Professor Gond.
So what practical steps can managers take to make sustainability a part of their business? Sandra Rapacioli, Research and Development Manager at the Chartered Institute of Management Accountants, says that it is vital to get accountants involved. Finance departments "should be involved in analysing data and making sure that it is robust, and that you are tracking the right key performance indicators".
Using the right technology is part of this. Excel is just not up to the job of collecting sustainability data, she says. "It's really important that companies start using dedicated sustainability performance management systems. Or even better, to integrate their sustainability data into their financial systems."
Marks & Spencer launched its CSR strategy, Plan A, in 2007 with the aim of becoming the world's most sustainable retailer by 2015. Stores, offices, warehouses and delivery plants are now carbon neutral, and it has reduced non-glass packaging by 25 per cent.
Plan A has saved M&S £185 million since 2007. How has it done it? The business has "big, bold commitments", says Adam Elman, Head of Plan A Delivery, "but they get delivered because Plan A is thoroughly embedded into reporting." Store managers have to report on plastic bag use and clothes-hanger recycling with the same rigour that they report on sales. And it goes right to the top: 20 per cent of bonuses for executives and board directors are awarded for hitting Plan A targets. "If you're a director, it's as serious as driving your sales figures," says Adam Elman. And that filters down. "It's hard for people not to focus on it."
Telling a story
Another leader in sustainable practices is Alliance Boots. Richard Ellis, Group Head of CSR, says that quantifying the benefits is vital. "CSR people are very good at telling a story," he says. "They talk about trends. But if I can say that by doing these things our fuel bill has come down by £1.68 million, then everybody in the company says: 'Let's have some more of this', and they become more engaged."
The basic strategy at Alliance Boots, he says, is to make sustainability the responsibility of everyone in the business. For example, lorry drivers said that it was inefficient to drive into city centres, so Alliance Boots moved to "wagon and drag", where a lorry delivers a trailer to an out-of-town store and a smaller, more fuel-efficient vehicle finishes the journey. When people realise that sustainable practice such as reducing CO2 is part of their job it becomes "part of the way they behave, and not something they have to be constantly reminded of".
Some of the financial benefits will come only with time, and other benefits might be in hard-to-measure areas such as the company's image. But Professor Gond says that making CSR work is largely a question of applying pressure to the right places in an organisation. The proof? Alliance Boots has just two dedicated CSR employees.
*The paper was co-written by Professor Gond at Cass; Suzana Grubnic, Senior Lecturer in Management Accounting at Loughborough University's School of Business and Economics; Christian Herzig, Lecturer in Sustainability Accounting and Reporting at Nottingham University Business School; and Jeremy Moon, Professor of CSR at Nottingham, and was published in Management Accounting Research.
Jeremy Hazlehurst is a freelance writer. He can be contacted at email@example.com