Sustainability: Are you complying or leading

A company’s journey to embed sustainability in business operations moves through a maturity path along a continuum that spans compliance, obligation, efficiency, and leadership. The first two stages describe organisations that are currently focusing on what they must do and what they are obligated to do, respectively. The focus in the first two stages is therefore value protection. We examined these stages in the first part of our article last week. Organisations in the third stage in the maturity path have built in the efficient use of resources in their operations. The focus at this stage is on the ‘smart to do’. Efficiency has been a key internal driver for sustainable practices and is the low hanging fruit when moving beyond compliance and obligation. Waste of resources is costly. Efficiency in all forms reduces costs, and so it is no surprise that many organisations have promoted sustainability efforts that result in reduced direct costs. Efficient use of resources is not specific to any industry or entity. Every organisation, regardless of type, uses some form of resource in its day to day operations and therefore has an opportunity to build in efficiency in their utilisation. Common examples include reduced energy usage in the data centre, reduced water usage in manufacturing and office facilities, reduced paper usage in the office, and reduced material usage in packaging. These efficiencies reduce costs while also aiding sustainability through the reduced use of resources. Such efficiencies make sense with or without a sustainability impact, but pairing their contributions to the bottom line with their environmental and social impact creates an even greater incentive to support sustainability. At this stage, an organisation has matured from value protection to value creation. The fourth and most mature stage of becoming a sustainable business is market leadership. Sustainability leaders embed real, measurable, ongoing commitments to sustainability practices as a strategic differentiator, going beyond the immediate benefits of compliance, obligations, and efficiency. Sustainability is embedded when every part of the business makes decisions that intelligently weigh the economic, environmental, and social impacts on the long-term ability to sustain the business. When embedded, sustainability actually becomes a key driver of innovation and growth. The focus by entities at this stage of the maturity path is on long term viability. These organisations have moved from value creation to increasing value. In the 2011 PwC Global CEO survey that included business leaders in Rwanda, most of the CEOs interviewed indicated that environmentally friendly products and services are an important part of their innovation strategy. When linked to business strategy, sustainability becomes a core enterprise value. By becoming embedded in operations, sustainability objectives can become a part of long standing measures of enterprise performance, such as profitability, innovation, growth, and industry leadership. The leadership opportunity is not limited to enterprises, but extends to countries. Management of energy and other resources is increasingly becoming the basis for organizational and national competitiveness, with financial and market advantages accruing to those that systematically and strategically optimize their use of energy and resources. Compliance is an “outside-in” approach in regard to where the goals are established and how individual stakeholders relate to the topic. Engaging with sustainability to meet obligations, then for efficiency, and ultimately for market leadership transcribes a path that converts outside concerns into inside engagement. It becomes a meaningful component of every business decision. The author is a Manager with PwC Rwanda. samuel.g.kariuki@rw.pwc.com