NINE MILEM a n a g e m e n t C o n s u l t i n g

The RealMeaning of Sustainability

Copyright © 2012. All Rights Reserved. The Nine Mile Management Consulting Group

Brar, H., Dhir, M., Elliott, G., & Tabak, P. November 2012

www.ninemileco.com

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The Real Meaning of Sustainability

What’s in a Word? Sustainability, sustainable solutions, and sustainable growth are far too often thrown out there and used as buzz-words. It’s arguable, but in today’s environment, the word sustainability is starting to lose its resonance. While most people have a hard time grasping what sustainability actually means, more harmful is the use of “sustainability” to promote a company’s green image – without having any foundation in the core principles of sustainability. The Definition of Sustainability If one were to ask a stranger to describe what sustainability means, the answer often presented would be in regards to being environmentally friendly, finding ways of doing business that inflict no harm on the environment, or reducing waste. While all of these common scenarios describe elements of sustainability – they do not form the definition. Sustainability can almost be described in a purely mathematical sense. Sustainability can be thought of in two different ways – (1) sustainability of processes and (2) sustainability of growth. In the first case, a process can be defined as a transformative tool, event, or activity that turns inputs into outputs. In the second case, growth can be defined as the rate of change of a quantity, whether it’s net profits, sales, etc. Figure 1:Sustainability as a Concept Sustainability of Processes A sustainable process is one that transforms inputs into outputs, while at the same time ensuring that these inputs or outputs are not being unfairly taxed, i.e. depleted, diminished, or destroyed. Therefore, sustainability of processes ultimately puts in place a mathematical limit or restriction on the amount of

inputs that can be consumed and outputs that can be generated while ensuring that neither is being unfairly taxed. In the end, the sustainability of a process ultimately imposes a restriction to the rate of transformation of inputs to outputs. Figure 2:Sustainability of Processes Figure 3:Restrictions to the Rate of Transformation Sustainability of Growth Sustainable growth refers to the rate of change of a quantity, while ensuring that this rate of change does not become unbounded, i.e. if the growth rate is too high, if the growth rate is accelerating, or if the growth rate is unstable. If growth is truly sustainable, it would mean that the rate of change of a specific quantity is bounded by some upper limit that is either based on the company, competitors, environmental conditions, macroeconomic factors, etc. Therefore, according to these definitions – the word sustainability does not necessarily link it only to environmental considerations, even though most of the time in popular culture it is. Sustainability is actually a very broad term and at its core, the concept encompasses a view that inputs and outputs are not

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Limit of Sustainable Process

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∆𝑰𝒏𝒑𝒖𝒕𝒔

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unlimited and growth cannot be infinite. It’s as simple and complex as that – it comes down to rates of transformation (sustainable processes) and rates of change (sustainable growth). Figure 4:Restrictions to the Rate of Change The Development of the Concept of Sustainability As far back as probably even 5 or 10 years, the concept of sustainability was probably not at the forefront of any business decision making process; it did not make the front pages of any newspapers, and was seen only at the periphery of a company’s operations. So how did the concept of sustainability ultimately become an important business idea – why are leaders spending time even considering sustainability? According to Georg Kell, the Executive Director of the United Nations Global Compact, he considers interest in sustainability to be on an "upswing.”

1While sustainability

has large roots in environmental considerations, it gained momentum as the global climate change debate was coming to the forefront and former US Vice President Al Gore & the IPCC won the Nobel Peace Prize in 2007 for “their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change.”

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This ultimately began affecting the global corporate climate as businesses started to look at “sustainable development,” “corporate social responsibility,” “corporate responsibility,” and “corporate citizenship.”

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The Sustainability Mask: Using Sustainability to Artificially Boost a Company’s Image

So it’s already been established that sustainability in a company involves more than just reducing paper, waste, and energy consumption. There has to be a solid company-wide strategy in place to deal with all components of sustainability in every aspect of a company’s value chain; from procurement to logistics to operations, and even sales and marketing.

Therefore, instead of just spouting out concerns about sustainability in order to boost a company’s image – a total approach should be taken to see how sustainability can be applied to every aspect of the business, both sustainable processes and sustainable growth.

Sustainability as a Strategy

A company’s goals, mission statement, and vision must consider sustainability for it to ultimately take hold in the rest of the company. For example, a company that clearly pollutes and has high levels of Greenhouse Gas (GHG) emissions yet at the same time communicates “sustainability” through its corporate website just to “look favorable” is not really a sustainable one.

In order to implement a truly sustainable strategy within a company, it must come from within and from upper management in a top-down approach, infiltrating all aspects of the business. Figure 5:Sustainable Strategies from the Top… Down

Where to Start? The often daunting task is knowing where to start, what to do, and how to approach “being sustainable.” It must be clear (if it has not already been made so), that sustainability can and does affect every business process. For example, filing paperwork with the secretary may no longer be needed if the company takes a paperless business strategy throughout its operations. In addition,

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∆𝑻𝒊𝒎𝒆

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a company’s GHG footprint may be reduced by replacing non-urgent flights between offices with company-wide video conferencing initiatives. Moreover, the use of plastic wrap in the packaging of a product can be reduced by optimizing the way inventory is handled. Lastly, electricity consumption can be reduced by the very simple act of installing motion sensors to turn off lights when no one is in the area.

Common View of Sustainability in Business

The following summarizes some key findings that were presented in the 2008 report by the Economist Intelligence Unit which surveyed 1,200 executives worldwide and concluded upon the following results

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Businesses Need to Raise their Game: Out of 16 identified sustainability policies, global companies on average only implemented 4.8. Furthermore, most C-level executives would describe their company’s efforts to be sustainable as poor.

Supply Chain is the Weakest Link: One-fifth of the company’s surveyed admitted that their company performed poorly in terms of supplier relations in regards to both the environment and human rights issues.

Sustainability Reporting: Only 22% of executives have reported that their companies had Triple Bottom Line reporting in place (People, Profits, Planet).

Sustainability Does Deliver Results: An overwhelming majority of executives indicate the sustainability measures do pay off. 57% indicated that the benefits of pursuing sustainable practices outweigh the costs. Most companies implement sustainable practices in order to reduce energy expenditures.

Link Sustainability & Share Price Performance: It was uncovered that those companies that paid the most attention to sustainability issues also had the highest share price growth. High-performing companies in general put emphasis on social and environmental considerations in their operations.

In the end, the top three reasons why businesses have adopted sustainable practices are

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1. Ability to attract new customer base/retain existing one.

2. Improved shareholder value. 3. Increased profitability.

Nine Mile Management Consulting At Nine Mile Management Consulting Group, we know that true environmental sustainability comes from a thorough analysis of an entire company’s operations from end-to-end - but not forgetting that a product’s lifecycle can extend far beyond a company’s control. Nine Mile Management Consulting offers environmental sustainability services and provides actionable results that companies can use to become more efficient in their operations, reduce consumption of resources and electricity, reduce environmental greenhouse gas emissions, and become steps closer to achieving Carbon Neutral status. Our team consists of Engineering Consultants, MBA Professionals, & Environmental Science Experts. Nine Mile Consulting’s Environmental Sustainability Services include:

Carbon Footprint Analysis Company Sustainability Reporting Electricity Consumption Reductions GHG Emissions Reductions Retrofits New Energy-Saving Technologies System Re-Design to Reduce Energy/Waste

For further information about our services, please visit www.ninemileco.com.

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References

1 Economist Intelligence Unit. (2008). Doing Good: Business & the Sustainability Challenge. AT Kearney, Bank of America, Orange, Jones Lang LaSalle, PricewaterhouseCoopers, SAP, ExxonMobil, SunGard. Retrieved from http://www.graphics.eiu.com/upload/Sustainability _allsponsors.pdf/

2 NobelPrize.org. (2012). The Nobel Peace Prize

2007: Intergovernmental Panel on Climate Change, Al Gore. Retrieved from http://www.nobelprize.org/