Putting sustainability to work can positively impact all the levers of economic value-added for a company.
The key levers are:

• revenues: market share, positive pricing, product and service innovation, brand differentiation
• costs: materials, energy, water savings; waste reduction and waste exploitation; recruitment and retention; health & safety monitoring; legislation compliance and reparations
• human capital: talent attraction and retention, motivation, innovation, productivity, strategic awareness
• corporate reputation and stakeholder perceptions
• improved governance, risk management and anticipating legislative constraints
• financial efficiencies: improved free cash-flow, reduced risk premiums, lower cost of capital, valuation multiplier…

When Toyota launched the Prius in 1997 they created a new market for hybrid power drive cars. Thirteen years later they have sold over 1.6 million units and are still uncontested segment leader. Their vision of clean transportation created a new source of revenue worth an estimated $1billion in profit to Toyota in 2009. All the major car manufacturers are now racing to recover the lost ground.

Furniture maker Herman Miller created a revenue stream and reduced costs of energy and waste management by converting its wood waste to on-site energy and its plastic waste to resalable industrial raw material. The main Michigan factory now sends zero material to landfill and the company has reduced its environmental footprint by 85%. It calculates a 40% average return on investment across its wide range of sustainability projects since 1994.

Around 1 billion people depend on fish as their primary source of protein, while 200 million people, in businesses large and small, make their living from fishing. The creation of the Marine Stewardship Council in 1997 was a significant step towards protecting the fishery commons, of which at least 60% is harvested to or beyond capacity. The initiative came from the Worldwide Fund for Nature, working with corporations — Unilever was a co-leader in setting up the MSC — and has led to companies such as Findus France positioning their whole product range on sustainable sourcing.

The model for the MSC was the Forest Stewardship Council, established in 1993 to provide certfication of products sourced from sustainably managed forests. Business depends on forest products for raw materials (timber for construction, woodpulp for paper and packaging…) and needs to ensure that its use of this raw material will not deplete the world’s forests faster than they can be replenished. In 2009 Kimberley-Clark committed to move to FSC certification for all its paper products. In 2010 Tetra Pak is targetting 75% FSC certification for its cartons sold into UK and Irish markets. (But natural resources issues are often complex: 80% of deforestation in the Amazon basin is to clear land for beef cattle feed.)

Since the 1990’s ‘BP’ stands — according to the company’s advertising — for Beyond Petroleum. BP was the first oil major to claim publicly that they had a vision of a post-oil energy world, which earned them a reputation as a bold and innovative organisation. At the same time they kept on pushing the boundaries in oil exploration alongside their global competitors. And as we all know, they made some expensive decisions on cost savings in deepwater rig maintenance in the Gulf of Mexico. On April 20 2010 BP’s share price was $655, for a market value of $123 billion. On June 17 its share price had dropped to $343 for a market cap of $64 billion. In other words, the value of BP halved within 2 months of the Deepwater Horizon disaster, and they faced further bad news to come with at least $20 billion in cash to find to meet compensation claims. How much competitive advantage would it have brought them to invest $20 billion in making ‘beyond petroleum’ a reality?

Life Magazine ran an article on child labour in June 1996. Nike’s suppliers of footballs in Sialkot — Pakistan were employing children in next to slavery conditions. Public outrage ensued and Nike’s reputation suffered considerably. Nike then devised a new strategy incorporating sustainable development.

	JAN 1997	AUG 1998	JUNE 2010
NIKE	$35	$17 (-51%)	$73 (+329%)
DOW JONES	6800	7500 (+10%)	10400 (+39%)
	Nike profitability depends on externalization of costs and impacts	Life Magazine article’s impact	Transparency and collaboration are now a Nike asset in a connected world

Today IKEA is recognized as a leading company in sustainability, but this has not always been the case. Das Bild, Germany’s most widely read newspaper, accused IKEA of selling toxic bookshelves, having found out that Billy bookshelves, IKEA’s most popular item, were fabricated with a varnish containing formaldehyde and producing VOC’s (toxic volatiles). These ingredients had been legislated against and IKEA was technically breaking the law. Immediately, the shelves were taken out of the shops, and IKEA’s turnover dropped by 20%, a loss of revenue in excess of $20 million, with additional direct costs estimated at around $7 million. As a result, IKEA decided to review their supplier agreements on the Billy range and were able successfully to reintroduce the line, which is once again a best-seller. The company went on to adopt a pro-active stance whereby they systematically forestall issues of this kind rather than comply after the event.

In the 80’s when Detroit’s car manufacturers introduced SUV’s, they successfully lobbied the government to label these Light Trucks so they would not have to meet the 27.5 miles per gallon US standard for cars. Four-wheel drives became the leading growth segment in the US car market. Then, in 2008, General Motors’ sales of 4X4 dropped by 70% following a steep rise in petrol costs, while at the same time GM lacked know-how and capacity to build fuel-efficient cars. In 2009, GM, whose strategy was based on sales of highly profitable 4X4’s, filed for Chapter 11. Losses reached $40 billion for the year. Unable to sell the Hummer brand, GM was forced to liquidate its flagship marquein 2010.

65% of EU consumers declare an interest in protecting the environment and 75% claim that they are willing to pay a premium for environmentally friendly products. Paradoxically, only 17% do so. In 2008-9 purchase behaviour researcher Nielsen/BASES noticed a surprising shift in consumer attitudes to environmentally and socially responsible products. Whereas previous studies had mapped ‘green’ preferences on the margins of mainstream purchase intentions, Nielsen’s new data showed that “green has evolved to where it can be a mainstream consumer proposition in many categories. While nearly 20 % of consumers fall into the “LOHAS” (Lifestyles of health and sustainability) and “environmental steward” segments, more than 60 % have at least some interest in green, and are willing to try products that are relevant to their needs.

In 1993 5% of US State and Federal government calls for tender on office furniture contained purchase criteria related to materials toxicity certification. In 2008 the figure was 95%.

Wal-Mart has issued a 16-part questionnaire to all their suppliers, to be completed annually for all product lines. Subjects covered range from CO² emissions to employee terms and conditions.

Nike have reviewed their product supply chain right up to design level, and involved suppliers at all levels in rethinking and reconfiguring Nike products to match up to the company’s sustainability goals.

Unilever linked up with Rainforest Alliance to train over 40 000 smallholders in Kenya, Bangladesh and India in sustainable agriculture and safe use of fertilisers, to ensure a sustainable supply for major European tea brands.

In many companies green teams composed of employees from all levels in the hierarchy generate new ideas, nurture local projects and spread the word to change company culture.

In the latest UN Millennials survey (2008) 87% of new university graduates said they had a strong or very strong preference for working for a socially and environmentally responsible employer.