Should our organization be focussing on a sustainable approach? What does that even mean?

Try using this as an initial guide.  Becoming sustainable is not a business fad. It is a serious decision with lots of strategic and resource ramifications.  Perhaps this will assist in your decision-making:

So here is my definition of SUSTAIN.  What do you think?

Strategic.  An organization, regardless of size has to have a strategic rationale for embracing and deploying sustainability within its practices.  What is the vision of what it is attempting to undertake and what are the timescales? Begin with the end in mind as Steven Covey says (https://www.stephencovey.com/7habits/7habits-habit2.php)

Other questions to consider from a holistic perspective include:

• What resources are required?
• What is the extent of the sustainable initiatives? Is it all-embracing or focused on an initial department or division?  Front or back office?  Supply chain or not?
• Has the strategic intent been communicated to all parties? Are they ready for any resultant change?

Universal. How big a net do we need to cast?  How universal is universal.  Too big and perhaps we are set up for failure.  Too small and is there any point?  Is there a right approach?  I am a big fan of Kaizen (the process of continuous improvement) and really back the ideas as shown in Robert Maurer’s book: “One Small Step Can Change Your Life: The Kaizen Way”.  He advocates the approach of taking small steps so that change is better managed and internalized.  Perhaps consider a small sustainable initiative, undertake it and discover what works and what does not.  Now apply the lessons at a larger scale, and perhaps this “experiment” is now scalable and can embrace more stakeholders and larger portion of the organization.  So perhaps universal is all about defining and articulating the scale of the initiative and then scaling up.

Stakeholders.  These are any interested parties who are involved in the sustainable activities and can be internal or external to the organization.  These stakeholders are intrinsically involved in undertaking and delivering the initiatives.  They need to be proactively involved in the communications and in identifying the wins (both short-term and long-term).  If the stakeholders are not identified and prioritized then how can you get things done to help the organization move forwards in the strategic sustainable direction set.

Transformational.  An organization that is truly sustainable has to be clear where it is going and communicate its strategic intent.  This will create changes at a number of levels involving staff, resources, equipment and impacting decisions.  It will create transformational impact.  The questions, is whether the organization is ready and willing to embrace this?

Activities.  If the strategic intent has been defined and articulated, then this will cascade into a series of activities that the departments, teams and individuals undertake to enact the sustainable initiatives.  Good management practices are required to manage and co-ordinate the activities to ensure success.   What activities are selected and what is the rationale behind the selection, and crucially has this been communicated to all stakeholders?

Innovate. Innovation is the ability to do something new, to translate an idea into a new product or service.  How can we use innovation to embrace sustainability?  Looking at this from the perspective of creating something disruptive or at a large-scale, limits the number of potential outputs from the process.  Examining what is done from a small-scale perspective (ties back into the Kaizen approach), provides more opportunities to innovate.  But does the organization have the culture to innovate, think and implement new ideas?  Perhaps we should consider innovation not from an external perspective, but from an internal perspective.  What processes does the organization undertake that can be subject to the innovation lens?

Novel?  If the rationale for undertaking sustainability within an organization, at whatever level, is not articulated, communicated and internalized then it will not move from the theoretical approach to the day-to-day activities of ensuring that the resources available today are used in a responsible way that does not adversely impact generations to come.

My definition of what the aim of an organization is to “maximize returns for its stakeholders”.

But over what term?  When we say short or long-term what does this mean and what are the implications for sustainability?

I started thinking about this when reading a HBR article “Capitalism for the Long Term: by Dominic Barton: http://hbr.org/2011/03/capitalism-for-the-long-term

If you take a typical business, what does long-term mean?  Three to five years?  This defines the strategic planning activities, allocation of resources, finance initiatives etc.  What about a ten or twenty-year timeframe?   This is typically unheard off in the West, but pretty much par for the course in the East, for the larger organization.

So how do these fundamental views of outlook impact sustainability?  If we use the definition of sustainability as being the capacity to endure, then having a short-term outlook (you decide what short-term means for you) will shape your view on all activities including the purchase and utilization of resources including materials, people, machines etc.  It shapes your finance initiates.  Is the organization seeking suitable short-returns that may increase its exposure to risk, in the pursuit of these returns.  This will shape an organization’s approach to sustainability and all activities associated with sustainable practices.

By its implicit nature, sustainability has a long-term outlook.  If we take the Bruntland Commission of the United Nations, March 20th, 1987, view of sustainable development as being the “the development that meets the needs of the present without compromising the ability of future generations to meet their own needs”, then a long-term approach is certainly viewed here.  So what happens when you are driven by the short-term?  The very nature of the markets in which you operate may dictate this and take this out of your control.  If the outlook is short-term, then what impact does this have on the sustainable considerations, your organization may be considering?  Are the organization goals at odds with each other (short-term metrics such as profit and growth versus long-term goals as sustainability)

Barton’s article focuses on the West near obsession on a short-term outlook and if we were able to adopt and consider a longer-term outlook, perhaps this would create better foundation for creating and sustaining growth, profits, allocation and utilization of resources, financing activities, use of personnel.

If you are driven by short-term goals and measurement indicators, yet want to have a long-term sustainable outlook, what are you doing to maintain balance?

In an article in the Independent newspaper, http://tinyurl.com/nwvgg9l; issues have been raised around the excessive use of water in creating commodity food products and why corporations need to take note on the excessive use.  I was startled to read that, “Each slice of toast consumed in Britain, for example, has taken up 240 litres of water in its production. It takes 1,000 tons to produce a ton of wheat and 16,000 tons for each ton of beef.” 

This is truly a staggering amount of resource to create basic products and who knows how much is used to create other staples.  It is generally accepted that water is no longer (or perhaps never was) an inexpensive product and service to create and we are all paying for this in our monthly utility bills.

The article suggests that organizations should record the true costs of production within its corporate filings.  This is an interesting idea to consider and though it may not get formal nor universal acceptance, it should be considered further as a concept.

There is almost universal acceptance around using Key Performance Indicators in its role in delivering an organization’s strategic intent.  So how about having Key Sustainable Indicators (KSI)? They would include key measures of activities that allow an organization to move towards its sustainable targets, both in the short and long-term.  In the case of the article above, water usage could well be a suitable KSI and strategic goals would be created in identifying how to reduce its planned usage.  To achieve the target it may involve becoming simply increasing efficiencies or innovating to reduce usage.

Should these goals be published or not?  There is no binary answer to this.  If they are published, it is open for public consumption and may provide an insight into the competitive nature of the organization.  Perhaps a good first step is to have a suitable set of internal indicators to work towards. 

If selected:

• Ensure that they are understood and communicated to all employees (and other appropriate stakeholders) as to why they have been selected and how they will allow sustainable goals to be achieved.
• They are SMARTR (Specific, Measurable, Realistic, Time-bound and Reviewed).  Simply selecting a measure is not enough and they should be periodically reviewed to ensure that they are fit for purpose and still relevant.
• That not too many KSIs are selected.  Have too many and they will be difficult to maintain and manage.  Have say between 5-7 KSis.

Sustainability by definition is the capacity to endure… 

Let us take this global definition and apply it at a micro level within an organization and look specifically at the act of management.  The number one reason why someone leaves their organization is not financial, but their manager, specifically the relationship between the employee and the manager that becomes corroded over time and eventually leaves the employee with the determination to leave.  How sustainable is this? 

When an employee leaves, there is a brain drain – a knowledge loss from the organization.  The act of hiring is expensive and takes time to incorporate a new team member within the team.  Also pre this process, if someone wants to leave, as a result of the employee / manager relationship, they become unmotivated, and this can spread within the team causing an opportunity cost to the teams effectiveness. 

Management is a responsibility, not a right.  Managers have to do many things on a day-to-day basis to get the most from their teams.  But what is the goal of a manager?  For me it is simple, to make others succeed.  A manager does not achieve success on his or her own, the team does.  Their goal is to create the operating environment that enables the team to be successful, both individually and collectively.  They have to embrace and execute a number of key skills on a day-to-day basis.  This includes delegating, coaching, leading, delivering, planning, dealing with conflict and managing it, communicating proactively, handling goals from above and below and prioritizing and organizing resources (human and physical).  The list goes on, but it does emphasize the wide array of skills that they need to develop, without necessary formal training and guidance. 

What happens when someone is given the responsibility of being a manager but is not able to develop these skill sets to make their team successful.  They are unable to deliver results and can create damage to the fabric of the team.  How many times have you seen a manager be elevated to the position of a manager, because they have risen to the top of their technical abilities, and in order to keep them, they are given a management path which in essence is a career in its own right.

To apply sustainable business practices, we need to train, mentor and develop managers in how to manage and lead their team, regardless of whether this is a local or global team.  To deliver organizational sustainability, we need individuals, teams, managers and leaders to develop their staff so that they can endure and contribute to not their own individual success, but also that of their organization.  For me, sustainable business management equals good management practices.

I spend time working with companies that work in a global environment with front offices in one country and back offices in another. They face day-to-day issues in achieving their tasks, such as: overcoming cultural nuances, time zones, communicating using existing technology and leading dispersed teams when travel budgets have been frozen.

These problems often stem from applying a co-located method of managing and leading a team to the virtual global world. There are small and large differences and they need to be factored in to achieve agreed outcomes. The reality is that often team members are communicating by email and in some instances, have no idea what the other team members key skills are, or in some instances what they even look like.

When you ask at a corporate level, why the organization operates globally you often hear the answer cost, as it is cheaper to offshore work to another country where the labor rates are lower than another country. Global working is still in its infancy as a management science, and organizations are still learning about what works and what does not. In the pursuit of lower costs, the long terms implications are often not considered and the question I ask, is whether this approach is sustainable?

If the real pursuit is cost, then yes a lower cost per employee, per hour discussion is relevant, and the gap between one country and another can be significant, but what about the long-term impacts? What happens when a “low-cost country” starts developing and the labor force experiences wage inflation? If the cost savings are no longer viable, then will the maintain presence in that location?

Often companies will invest in training and developing their workforce, but the end result is that trained individuals, will leave and seek other opportunities, so the parent company suffers from significant churn rates, that means more time spent hiring people and training them. This is certainly not sustainable, and works so long as there is a constant stream of eager applicants for jobs, but what happens if this runs out? What are the options? Focus on existing staff, or move to another country and start all over again.

As more and more companies offshore work, they are basically doing what others in their industry are currently doing. All in the pursuit of reducing and controlling costs but what are the strategic implications of doing this? If all organizations strategic intent is too offshore to reduce costs and increase profitability then this is not long-term sustainable and we are back to square one.

I encourage companies to consider the viability of their offshore models and think about the impacts from not just a short-term perspective, but a long-term sustainable solution that provides profit, growth and an environment that allows employees, regardless of where they are located to contribute and work seamlessly as a team.

In Harvard Business Review (March 2013), there is an article entitled MakingSustainability Profitable (Haaneaes, K. Michael, D and Rangan, S.) http://hbr.org/2013/03/making-sustainability-profitable/ar/1.

In the article, they look at organizations that have sustainability at the heart of their organization and show that this results in “above-average growth rates and profit margins.  In these examples, from across the globe, they are not looking at sustainability as an add-on, something to consider as it is in vogue, but make sustainability a core value of their organization, from which all other organizational activities follow.

They suggest three main approaches:

1. A long view: Investing in sustainability at the operational level to realize lower operating costs and resulting in attractive profits and margins.

2. Bootstrap approach to conversation: Implemented small process changes that generated substantial cost savings.

3. Spread sustainable efforts to the operations of their customers and suppliers, creating new business profit models.

So we see sustainability all around us. As a business you want to consider the concept of sustainability within your organization.  Where do you start? This is a key question to consider and not an easy one to address.  Well, let’s go back to the very beginning.  Why are we in business / or rather why do we exist.  I always answer that regardless of whether you are a business keen on making profit or a non-profit organization, that the reason why we operate is to maximize stakeholder returns. The concept of return means different things to different people, and could consist of making profit, gaining market share, benefiting a community etc.  If we look at a manufacturing business, we take a set of inputs (raw materials) transform them (through manufacturing) and if there is a value add in this transformation, then people will buy the resulting products.

The concept of value is well-studied in management literature and some seminal work was undertaken by Michael Porter, who identified the Value Chain concept. 

Considering a business, the model analyses the individual components within it, so that value-generating components can be identified to learn where profit can be gained. If we break down the constituent elements that create the product or service, we identify the processes, techniques and value add techniques that results in the transformation.  If this analyses has been properly undertaken, we can then look at how sustainability can be applied to drive the value addition.  For example, a key value-add contributor, for a manufacturing firm, will be the manufacturing process itself.  We look at the process from a sustainable lens.  How can the processes be optimised to meet sustainable targets?  Can they improved or manufacturing steps improved?  These fundamental questions, from a sustainable stance enables the value-add to be improved. 

We have finite resources, if they are used effectively, from a sustainable lens, then we can attain better returns from our resources, processes and create value add that maximizes stakeholder returns.