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Bringing More Sustainability Into Business Models

by CB Bhattacharya

Do you believe that sustainability is important for your company, but that it’s “someone else’s problem”? You aren’t alone: While most organizations talk the talk of sustainability — doing things such as integrating environmental and societal concerns into their business models — very few walk the walk.

Unsurprisingly, carbon emissions by the world’s largest companies are increasing, and only one-third of the 600 largest companies in the U.S. have any systematic sustainability oversight at the board level.

I have interviewed over 100 CEOs, C-suite executives, middle managers, and shop floor workers in more than 25 companies to understand why most companies fail to embed sustainability in their business models and what drives success among the handful that do. I’ve found that the answer is ownership: Companies that are winning the sustainability battle have created the conditions for their stakeholders to own sustainability. In these companies, sustainability is not someone else’s problem. Based on this research, I have developed a three-phase model that shows how companies can move beyond rhetoric and take ownership of 

Psychological ownership refers to feelings of possessiveness and connection that we develop toward an appealing object such as a person, company, or even an idea. And research has shown that feelings of organizational ownership lead to greater job satisfaction, engagement, productivity, and profits. This makes ownership a powerful concept for those seeking to galvanize a company around sustainability. Confronted daily with evidence of climate change and other issues that harm our well-being, most of us yearn to do something but don’t know what or how. Companies can fill this need and gain competitive advantage by transforming their stakeholders from bystanders into owners and making sustainability, including as it pertains to social good, part of their purpose.

My framework for creating such sustainability ownership has three phases: incubate, launch, and entrench. Incubation is the process of, first, defining the contours of your sustainability domain by reflecting on the purpose of your business and its specific role in the world. The second step involves concretizing your goals by generating a research-based list of material issues across your entire value chain. Such a list identifies areas of overlap in companies’ and stakeholders’ sustainability priorities. For example, at financial services company ING, an issue deemed material to its view of sustainability related to financing a variety of “sustainable transitions” in industries such as clean technology and real estate. This served as a basis for conceiving a new goal of sustainable transitions worth €35 billion; by 2016 the company had already hit €34.3 billion, prompting it to revisit the goal.

Many companies make significant progress like this in the incubation phase, demonstrating their willingness to take ownership of sustainability and even identifying opportunities to take action. However, very few have the ability to fully drive sustainability throughout their business with this step alone.

Launching your sustainability plan entails enthusiastically introducing it to stakeholders and setting the idea of ownership in motion. To entice employees and relevant stakeholders to own sustainability, sell it as an opportunity to contribute to the future well-being of both the company and society.  Sometimes you have to appeal to the head (monetary incentives, cost savings, career advancement), other times to the heart (look at the difference we make), and very often, both.

For example, the sustainability chief at the financial services company Old Mutual organized a workshop for 40+ future leaders and showed them that, through their loans and other services, they were having a real impact on their customers. By the end, one of the managers told her, “We’re actually having the conversation. We’re seeing how, through what we do in our day jobs, we can change lives.” This insight led that team to feel they came into work to do more than crunch numbers. It was an effective way to make them realize their business was about something bigger than making money, which is the type of insight that allows companies to begin the conversation around ownership of sustainability.

While appeals to the heart convince some people to take ownership of sustainability, economic reasoning may work better on-board members and hard-nosed line managers. IBM makes the business case for sustainability by walking its line managers through step-by-step calculations of return on investment. For example, sustainability experts at the company convinced line managers to transition from older, low-utilization servers to modern, intelligent

servers by showcasing the savings in energy costs and reduced greenhouse gas emissions, as well as the ability to use freed-up space and cooling capacity to support new business.

Having the proper training and systems in place is also critical to enabling everyone to make sustainability part of their job. As Keith Weed, CMO at Unilever, told me, “Don’t create a little department in the corner. Mainstream into all countries, all brands, all divisions. The sooner you have an exception, everyone thinks they’re the exception.”

At Unilever the R&D and marketing departments work in tandem to create and promote products that serve both business and society. Unilever’s waterless soap saves lives by preventing the transmission of dangerous bacteria and saves water, a vital and limited resource in emerging markets. When all employees and stakeholders use the sustainability lens to make decisions, a new business model takes root.

Entrenching these feelings of ownership makes sustainability routine — something people just do. Having measurements of success and providing ongoing feedback on sustainability targets will demystify stakeholders’ contributions and gradually move them to own sustainability as indivisible from their jobs. Managers can use sustainability goals to evaluate their direct reports and compare employees, departments, divisions, and business units.

I have visited factories that have large scorecards displaying their progress on greenhouse gases, water, and waste relative to other factories, which leads to conversations and becomes the basis of motivation, pride, and a stronger sense of sustainability ownership.
BASF uses a homegrown system called Sustainable Solution Steering to evaluate its products vis-à-vis sustainability needs and trends and to devise action plans for marketing or product changes through R&D. Using this system, BASF realized that polyfluorinated substances presented a challenge to the environment and developed recyclable and biodegradable paper-coating substances instead.
You can also consider the indirect effects of sustainability — using indicators like employee retention and customer loyalty rates — to make a continued business case for sustainability. Using statistical analyses such as regression, I’ve found that, all else equal, company sustainability initiatives positively influence customers’ buying behavior, employee retention, and even investor reactions.
There are many ways to enliven a sustainability ownership experience. For example, Marks & Spencer’s company-wide “Make Your Mark” initiative pairs employees with jobless young people whom they help develop skills and confidence. Initially a small initiative, it has grown into an integral part of Marks & Spencer’s culture, with a long list of employees waiting to become “buddies” to young people. The company also empowers local stores to come up with campaigns tied to their communities’ needs so that shop floor employees take ownership of sustainability. 

Companies are also wise to expand the ownership experience by participating in industry-wide or multi-sector efforts to drive systemic change. As one executive told me, “Unless you shift the whole industry, you’re only going to solve pockets of the problem.”

Several industries have launched partnerships between fierce commercial rivals. In 2009 executives from over 400 companies, including Nestlé, Coca-Cola, and Pepsi, came together to form the Consumer Goods Forum. Among other agreements, these companies pledged to work together to achieve zero deforestation by 2020 through the responsible sourcing of key commodities like soy, palm oil, beef, and paper and pulp.
Most of us work to preserve the value of things we own. Establishing ownership of sustainability issues prevents the feeling that it’s “someone else’s problem” to manage. Small actions on everybody’s part will lead to big differences: a future-proof company with engaged, productive employees, and a healthier planet.

CB Bhattacharya is the H.J. Zoffer Chair of Sustainability and Ethics at the University of Pittsburgh’s Katz Graduate School of Business.