SAP’s recent announcement of a long term strategic focus on sustainability covering its own operations as well as customer solutions, reflects a growing movement to make businesses more sustainable that is driven by increased awareness of the social and environmental risks, as well as the business opportunities.
Becoming a more sustainable business doesn’t come for free. Businesses need to change the way they operate to become more sustainable, but that takes investment of resources: financial, human and physical; at a time when many businesses are facing economic challenges.
So the question is: How does a business decide where to invest its resources for the maximum economic, social and environmental benefit?
Although decisions can be based on intuition, this increases risk as the impact of the decision may not be fully understood. Better business decisions are made if intuition is combined with insight based on knowledge of the cost and impact of the sustainability investments that could be made. However no two businesses are the same. Businesses operate in different industries, in different regulatory environments, with different customer and supplier bases, and different financial circumstances and resources – there is no single best approach to making a business more sustainable.
Software has a key role to play.
Business software that embeds analytical capabilities with support for operational processes such as SAP’s recently announced Business Suite 7, makes it easier to gain insight into the performance of a business which can then lead to better decisions – including decisions on sustainability investments.
This blog is the first of a three part series. It looks at the main business reasons for making a business more sustainable.
The next two blogs in the series will cover: Sustainability, Measurement and Software Solutions – Part 2; and how software, such as SAP’s Business Suite 7, can Sustainability, Measurement and Software Solutions – Part 3.
Why make a business more sustainable
A business often first focuses on sustainability because of visionary leaders such as Ray Anderson, founder of the worlds largest commercial flooring company, Interface Inc. who wanted to do the right thing for the future. He sums this up nicely in a poem written by one of his employees called Tomorrow’s Child.
Ray Anderson read the poem during his talk at the TED2009 conference in early February and was later interviewed with Shai Agassi (who now leads Better Place and used to be on the SAP board) by Southern California Public Radio about his firm’s approach to sustainability.
Ray says that his business has become more successful and profitable by becoming more sustainable. Initially they achieved $400m in savings by reducing waste. These savings financed all the company’s other sustainability initiatives and also reduced the cost of Interface’s products. It also generated customer goodwill which helped drive an increase in sales. Interface has been so successful that Ray Anderson is now invited to give over 150 talks every year about his approach to building a sustainable business.
This leads me to Business Reason 1: Sustainability can make a business more successful.
Many companies are also making sustainability demands on their partners. Here are two examples from many:
- Wal-Mart “As the need for more energy and products increases, Wal-Mart is working with suppliers to build a more sustainable supply chain, reduce greenhouse gas emissions and improve the environment.” Wal-mart video, 26th November 2008
- British Telecom “The energy consumption and environmental impact of a product or service (from manufacture, through usage, to disposal) is a mandatory criterion in all tender adjudication“. Analyst Presentation, 3rd June 2008.
… these examples illustrate Business Reason 2: Businesses need to become more sustainable in order to remain competitive.
Businesses also need to comply with regulations. For example research by SAP has identified thousands of regulations related to Environmental Health and Safety. Many of these are designed to protect the environment. They are also increasing. For example Gartner said at their GRC 2008 summit that the number of regulations doubled in the last six years.
… which provides the rationale for Business Reason 3: Governments, through regulation, will mandate that businesses adopt more sustainable business practices.
All of these business reasons: whether driven by a far-sighted business executive, driven by customers who themselves want to become more sustainable, or through regulations enforced by governments; demonstrate the need for businesses to factor sustainability into their plans.
The Sustainability, Measurement and Software Solutions – Part 2 in this series will look at the next step: how to approach making decisions on where to make sustainability investments.