From a Change in Thinking to Self-Propelled Success

Author: Dr. Katja Gußmann

Jan 17, 2020 Sustainability

How sustainability strategies succeed and what companies that are on the verge of tackling sustainability should keep in mind.

In a destroyed world, you can‘t do successful business.” A simple sentence from the mouth of the Dalai Lama, a man who likes to smile and radiates confidence, even as he says things like: “Without humans, Earth would be better off”. Wars, climate change and economic hardship on one hand, a throwaway society and a decline in values on the other: In global society, there’s growing unrest with regard to the future – and not just on Fridays.
And the unrest is falling on sympathetic ears. When managers across Europe join the #ManagersForFuture campaign organized by CEC European Managers, the European umbrella organization of managers based in Brussels, they want to set an example for sustainable leadership; for an equally ecologically, economically, and socially responsible company management. This approach goes far beyond the climate debate. It is based on the 17 “United Nations’ Sustainable Development Goals” (see chart) and supplemented by “Personal Goals,” which focus on personal development as well as constructive cooperation in professional life. At the start of the campaign in September 2019, CEC President Ludger Ramme stressed that more and more managers are recognizing the value of having the right competencies in the field of sustainability. However, today’s business education, corporate structures, and management practices are not appropriate because they do not have sufficient sustainability impact. In a world characterized by volatility, uncertainty, complexity, and ambiguity (VUCA), completely new leadership qualities are needed.
Involve employees
This statement is entirely in line with Prof. Dr. Axel Kölle’s opinion. He leads the Center for Sustainable Corporate Management in the Department of Economics at the University of Witten/Herdecke and says: “Sustainability only works if it is wanted by the very top; by the managing director, the executive board.” What’s more, it must be a combination of top-down and bottom-up within the company. Management must convince employees of the idea of sustainable management and get them involved, in order for them to make sustainability their own business. It doesn’t make sense to reactively be a bit more sustainable just because the customer demands it. Sustainable – the term is based on three pillars: economic, ecological, and social responsibility.
Long-term success
But there are other concrete reasons for a rethink in boardrooms besides social pressure: In Germany since 2017, companies with more than 500 employees have been required to prepare a corporate social responsibility (CSR) report in addition to a financial report. Germany has thereby transposed a 2014 EU directive into national law. Another strong driving force for greater sustainability likely lies in financing. This has already been reflected in the Dow Jones Sustainability Index for slightly over 20 years. In 1999, the Dow Jones publishing house, in collaboration with the Zurich-based company Sustainable Asset Management (SAM), established the share index, which not only takes economical but also ecological and social factors into account and offers suitable guidance. The financial crisis that began in 2007 also helped raise awareness of the sustainability aspect. Short-term profit-making is out. In order to keep default risks low, banks are now much more cautious about lending money. In the same way, investors and fund managers value long-term successful corporate concepts.
Positive contribution
The global sustainability rating agency ISS ESG also takes a particularly detailed look at company data. For the company, which has its German headquarters in Munich, one thing is clear: “ESG Environmental Social Government has developed from a niche into a necessary part of institutional investment and wealth management.” The experts can look back on 30 years of experience. In their latest report, they state that stricter regulations will certainly lead to a change in thinking within companies. “But, in the end, both the investors and the evaluated companies themselves show a heightened awareness of the importance of ESG factors and increasingly understand that they provide a positive contribution to corporate success.” Still, there are differences between industries. While manufacturers of household and personal care products have the highest proportion of companies with the best ratings (28 percent), oil, gas, as well as fuels (6 percent) and retail (4.8 percent) are lagging behind.
Optimize logistics
As long as goods are transported by truck, one of the assumptions is that the problem of CO2 emissions will remain. But there are also encouraging examples in the transport and logistics sector. One of these is the German trucking company Große-Vehne, based near Stuttgart, which employs around 2,200 people at seven locations and generates sales of approximately 250 million euros. No efforts to keep fuel consumption low, optimize driving style, avoid empty runs, and optimally load the truck can change the fact that every trip causes CO2 emissions. That’s why company boss René Große-Vehne is planting trees – on the distant Mexican peninsula of Yucatán, organized by the NGO “Plant for the Planet.” 140,000 trees planted there offset the freight forwarder’s 2018 CO2 emissions. Große-Vehne is aware of the accusations of “deals of indulgence.” But the important thing for the manager is that planting trees is only part of the strategy, which initially analyzes all company processes in order to optimize them from a CSR point of view. Compensation is the last resort for business units whose potential has been exhausted.
Sustainability in all its facets
In light of the CO2 debate, many people see the mobility of the future rolling on rails. The German Federal Environmental Agency calculated greenhouse gas emissions of 103 grams per ton kilometer for a diesel truck in comparison to 19 grams for a freight train (Source: TREMOD 5.82). But even in this regard, things can be improved, as one of the world’s leading train manufacturers demonstrates. Alstom, headquartered in Saint-Ouen-sur-Seine near Paris, scores top marks for its sustainability management. “From train manufacturer to sustainable mobility provider” is the company’s motto, which displays the claim “Mobility by nature” beneath the brand name. CEO Henri Poupart-Lafarge likes to be quoted as saying: “As the world’s leading provider of sustainable mobility, we have a great responsibility to our customers, partners, employees, passengers, and, ultimately, to society as a whole.”
The communication strategy focuses on sustainability in all its facets. Alstom’s publicly announced goals for 2025 include: 25 percent less energy consumption for mobility solutions, 100 percent electricity from renewable energies, 100 percent of suppliers tested according to CSR and Ethics and Compliance (E&C) standards. This thinking leads to product innovations such as the Coradia iLint zero-emission train system: It is powered by a hydrogen fuel cell that generates only steam and condensation. After an initial test operation in the German state of Lower Saxony, trains have already been ordered for the Rhine-Main region, also in Germany, and the Netherlands is also starting a pilot project in Groningen.
Changed mindset
In an entirely different sector, namely Electrical Components & Equipment, lighting specialist Signify NV ranks first on the Dow Jones Sustainability Index. Artificial light is a power guzzler, but nothing works without lighting in the modern world. This is where opportunity lies in technology: Lighting accounts for approximately 13 percent of the world‘s electricity demand. According to Signify, switching to LEDs could reduce consumption to eight percent by 2030. For its own company with more than 29,000 employees in over 100 countries, Signify has declared the goal of a recycling economy: zero carbon, zero waste in landfills, prevention of injuries, sustainable supply chains. It is interesting to look into the future of the business – not just regarding lighting – because it shows that sustainability is indeed fundamentally changing attitudes towards business: Circular Economy is replacing the linear business model.
One might think that this is a Herculean task, given the innumerable aspects encompassed by the concept of sustainability. Anyone who has privately tried not to throw away food, to make a purchase decision based on the manufacturing location stated on a sweater’s label, to switch from cars to bicycles, and to avoid packaging waste when shopping, knows how demanding sustainable behavior can be. The United Nations is also aware of this and has published a guide for this large target group: “The Lazy Person’s Guide to Saving the World”. It includes tips on things you can do “from the couch” to support sustainability.
Companies, on the other hand, are seldom lazy; some merely shy away from the effort. Axel Kölle, whose institute currently advises around 70 mostly medium-sized companies, observes: “Many companies already do a lot, but unsystematically.” According to Kölle, they must refine their strategy. This includes introducing sustainable processes, as well as measuring, documenting, and communicating them. Which has to be a holistic process. Those who tackle this correctly, ideally motivate their employees, from which point onward sustainable action propels itself. And even if a rethink in the company is triggered by external pressure, Kölle takes a pragmatic view: “Ultimately, the environment doesn‘t care which motives save it.”
The 17 Sustainability Goals of the United Nations
The goals serve as a blueprint for a better and more sustainable future for all. The 17 objectives are interlinked, and they are supposed to be achieved worldwide by 2030.
The concept of sustainability permeates all areas of a company:
• Personnel: An attractive employer ensures a work-life balance to also be attractive for Generation Z; they pay fair salaries, in return for which they get satisfied employees, lower sick leave rates, and reduced fluctuation rates.
• Company location: Energy-efficient buildings reduce energy consumption and thus operating costs.
• Product lifecycle: The times of the throwaway mentality are over; today, taking responsibility for the product runs from the supply chain over the production to the sale and finally to recycling. In return, the customer’s trust in the product goes beyond the mere product promise – an added value that is becoming increasingly important in the competitive arena.
• Image and communication: positive external image, do good, talk about it, and strengthen your market position.
The list goes on. It becomes clear that sustainability doesn’t happen in passing but has to be anchored in the core of entrepreneurial thinking. Only then does it pay off.
Signify is taking an enormous step with its “Circular Lightning” program:
• from transactional to relational: light as a service
• from consumables to durables: product life extension through design and service
• from ownership to performance: access to benefits is more important than ownership
• from take-make-use to reduce-reuse-recycle: serving multiple lifecycles