January 23, 2014

Are Your Sustainable Practices Really Making a Difference?

Jim Harris
Magazine Article

It seems 2013 was the year of strategic renewal. Most of Canada’s big retailers began the year with established business sustainability initiatives. Having made significant progress in eco-efficiency, companies were refreshing their business sustainability strategies after five or more years of experience under the belt.

Those doing it well during the last few years had framed and implemented business sustainability as an opportunity to reduce risk and contribute to the bottom line, primarily via cost avoidance. Nonetheless, the value proposition of eco-efficiency for many retailers was beginning to level off.

While the low-hanging fruit of eco-efficiency in packaging, building and transportation operations had generated hundreds of millions in cost savings for retailers, much of this low-hanging fruit had been picked, with additional projects in these areas facing diminishing returns. And so many sustainability managers explored new sources of value for their sustainability initiatives.

In 2013, the focus of retailers and manufacturers shifted, with increasing financial and human resources directed at mitigating the social and environmental footprint of their products. The environmental footprint of products is a rich source of opportunity, often representing 85% or more of a retailer’s total annual environmental footprint. The 2013 factory fires in Bangladesh only emphasized the potential brand-risk of such issues.

Additionally, the growing burden of a fragmented extended producer responsibility (EPR) legislative framework across Canada had generated increasing cost pressures for years — mushrooming at an annual rate in excess of 30% for some national retailers — as the legislation continued to spread to more jurisdictions, the market value of recyclables continued to be poor, and municipalities shifted 100% of the costs of “blue box” and other such EPR programs to the first importers or brand owners of product (usually, retailers).

To successfully mitigate the brand, economic, social and environmental risk of the product footprint, retailers focused their efforts on making sustainability more relevant and material to the day-to-day operations of their core retail functions — specifically, strategic sourcing, merchandizing and vendor management.

2013 was the year in which virtually every national or international retailer in Canada was focused on helping these functions and their product manufacturers understand the relevance of sustainability concepts to their traditional operational mandates, with many linking sustainability outcomes to compensation.

Just as eco-efficiency was the platform for making sustainability relevant to real estate, transportation and packaging operations during the last few years in Canadian retail, 2013 was the year in which sustainability was incorporated into the notion of “product quality” — one that includes the economic, social and environmental aspects of product. This was and continues to be the emerging platform for making sustainability relevant to strategic sourcing, merchandizing and vendor management.

The elephant in the room however, is that while sustainability will continue to be relevant to the business operations of retailers and product manufactures, management has utterly failed to make sustainability a material or even a well-understood concept for front-line employees, customers and most product brands, except during times of crisis.

This is the real challenge of business sustainability in 2014. I am confident that sustainability will continue to create value; however to scale and be material, managers are going to have to figure out how to make sustainability relevant to their brands and the people the manage and buy them — and not just during times of crisis.

Original Article

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