Making the Business Case for Sustainability: Obtaining Top Management Support

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Making the Business Case for Sustainability (3) updated

Leading Green is delighted to announce a new Sustainability in Action leadership course for Environmental Management, EHS and Sustainability professionals.

Obtaining Top Management Support (a new 1 day course)

22 – 25 January 2019

Getting across the board buy-in for sustainability in organisations can be difficult.  Progressing strategic actions that create visibility for and awareness of sustainability, both inside and outside the organisation will require top management support.  When seeking to change an organisation’s sustainability culture, their support – which must also require their participation and involvement, may be the most important success factor before you start!

Top management support is the critical success factor when progressing a business sustainability agenda.

This one day course sets out a strategic pathway that aims to supports you

  • self-assess the degree to which a sustainability framework is embedded across  your organization, helping you understand your company’s progress, and
    where to prioritize your efforts (1/2 day).
  • The second half of the day sets out a toolbox of tips and tactics to help win support, participation and involvement from the CEO and senior leadership team,to identify opportunities to support your CEO’s journeys to embed sustainability, and to increase the visibility of for sustainability initiatives within your organisation.

The course focuses on your day-to-day activities and your organisations direction of travel.  It follows an established pathway, used successfully within several Business Schools and international organisations.  The course’s objective is to help you personally:

  • Advance your organisation further along the path from environmental management/EHS to sustainability
  • Self assess progress year on year
  • Introduce your sustainability agenda to senior management
  • Increased your corporate visibility
  • Align Sustainability with the Corporate Plan, and
  • Demonstrate value and win support.

The Courses will be held during the 22nd – 25th January 2019 in Birmingham (2 days); Sheffield (1 day) and Lincoln (1 day).

This 1 day course is designed to align with IEMA’s CPD requirements for environmental professionals, with elements of the course corresponding to requirements within IEMA’s Sustainability Skills Map.

For further information, delegate rates and details contact:  Ross Marshall at info@leading-green.com or view the Training page.

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Supporting Business Leaders implement Sustainability in Business

Ross Marshall has over 25 years experience of senior level Corporate Environmental Management & operational Sustainability within the Power, Water & Government Sectors.  He is involved in the accreditation of environmental professionals for IEMA.

At Leading Green, our approach to sustainability in business training & consulting encourages our clients to look closely at their own internal leadership strengths. Helping them adopt an inquisitive state of mind and supporting them in how sustainability can support their long-term business strategy.

 

 

 

 

 

 

 

 

 

Brainstorming with a Property Developer CEO over Energy Efficiency

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About 60% of total energy efficiency investment lies within the property and building construction sector, yet on occasion it seems that 75% of the resistance to building in energy efficiency into new development lies within the C-suite of such companies. This is a hard, pragmatic sector to operate in and risk aversion can be a necessary survival trait as the market fluctuates.

Having grown up around family run property development and estate agency owners  I had been a useful addition to site construction crews on projects as a teenager and subsequently regarded as the black sheep of the family for becoming a corporate environmental manager.  My description of myself as a ‘green businessman’ cut very little ice in their commercial eyes.  Only when I had honed my skills on guiding large infrastructure development through planning systems within the UK power, renewables and water sector did they become interested.  I was now a useful source of advice on EIA, legislation, planning laws and explaining to them why floodplains, ancient woodlands and habitats were being actively protected by communities from their next money-making scheme.

So, this mentoring meeting on sustainability in business with the CEO of a sizeable house building company was following a predictable route.  He was interested in what I had to say, but wary of what I was saying.  His organisation with many others were being bombarded with the ‘sustainability’ message, but few commentators had helped him  drawing linkage to what it meant for him personally and for those actively leading organisations now at the forefront of climate change adaptation hopes.  He was intelligent and strategically far-sighted to understand that the way they operated now had to change, but needed help and more rational reasons to actively jump onto the sustainability wagon.

We agreed that as a ground rule sustainability initiatives had to either add +£1 to the operational profits or save £1 expended in risk.  The core strategy had whatever to add a minimum of +£1 to his balance sheet.

So, we sat down and brainstormed!

First, we addressed the direct benefits of energy efficiency regarding climate change so that we could park that issue first and go on to explore other potential benefits of energy efficiency. We agreed that the building & property development sectors has an important role to play via aggressive efficiency improvements within new build (and existing) as a contributor to limiting the pace of global warming.  As evidence to this we referenced a recent International Energy Agency’s (IEA) market outlook on energy efficiency that claimed that a concerted drive in energy efficiency policies could assist the world in achieving ca 40% of the emission reductions needed without requiring new technology.

We discussed the options open to his company to improve energy efficiency design. There was a lot they could do but the blockage in his mind was just how they could boost financial returns, as any benefit advantage to the buyer was dependent on increased borrowing costs, energy-efficient material costs and added construction time costs to his organisation. These added costs would have to be passed on to the buyer at the detriment of a higher purchase price.  He recognised that the buyer could eventually recover those added costs in lower energy bills, but in risk terms the marketplace still revolved around ‘location, location, location, and mortgage cost.  The only clearly marketable attribute was the attractiveness of a ‘green’ home to his target market – relatively successful, dual income, young and mid-life professionals.  An advantage yes, but unquantifiable in the sellers marketplace or when seeking added capital for a scheme.  Little progress here towards his +£1!

I then turned the discussion over to the evaluation of alternative and more sustainably innovative options to identify added value finance and business model benefits based on added energy efficiency.

Site design and placement

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Asked if he ever took the alignment of new property’s into account, the answer was ‘No! the priority was housing density and profit return on a site!’.  So we discussed placement for solar efficiency with housing density + return.  Exploring an idea where a development was maximised for the fitting a mass photovoltaic scheme in its design as the site was constructed.  The factory unit or property houses benefitting from the scheme, but ownership of the asset remained with the development company for an initial period before transferring over.  How did he feel about his organisation branching out and becoming an ‘energy company’ exporting into the local grid?  Monetising the potential energy benefit as part of the development return had attraction he agreed:

  • It could reduce the risk profile – for even if the buildings were empty, they still produced capital returns post construction.
  • A house build-carbon reduction-renewables scheme could appeal more to the third-party financier marketplace in the future.
  • Such a scheme could have a predictable return on investment, and the cost in solar installation was still reducing in price.
  • The energy units were reproducible on a scale that potentially made the added installation costs attractive.
  • there was still the option of possible energy efficiency grants.
  • The concept could help in demonstrating lower cost starter homes, and
  • It had a marketable factor for those seeking a mortgage and concerned about rising externalities.

The non-energy benefits (NEBs) of energy-efficient buildings.

It was becoming clear from our session that householder or tenant energy cost savings were not always enough to drive sustainability strategies into the property market.  A robust business case and ROI argument needs to consider additional factors in assigning that +£1 to the developer.

I raised the concept of ‘stranded assets’ as the organisation had a property letting arm within its business portfolio.  What was the risk of these properties decreasing in value or becoming stranded if energy efficiency standards dramatically rose in the future?  The scenario we discussed was a significant shift in Government policy in response to the +1.5oC temperature target.  What would be the impact if this became a hard and fast target in government or global energy policy reaction?

  • Could such changes render ‘bought cheap and done up’ properties a future financial liability?
  • Would investors continue to lend real estate capital for properties they deemed at future risk of becoming stranded liabilities?
  • What strategic criteria should now define a ‘cheap’ property in terms of its energy efficiency or retrofit profile?

These were new questions he hadn’t considered before and needed to be considered as future risk scenario.

Moving on from the risk of stranded assets we agreed that the top non-energy benefit for his organisation would lie in increased asset value within their holding portfolio and within individual buildings within that portfolio.  One obvious advantage was the desirability to rent of individual properties as a reflection of energy efficiency.  Anything that increased the longevity of tenants or reduced the lapse time between losing one tenant and gaining another could have a significant NEB return we agreed.  A financial return that was much greater than the energy cost savings implemented into the fabric of that building originally, if a building remained empty for too long.

If a building provided tenants with a greener, more pleasant place to work/live and which also contributed to operational costs, its desirability and occupation periods enhanced during its life. Within the portfolio, we also agreed that such buildings would have a lower risk exposure to future regulatory energy efficiency challenge and the expense of retrofitting. Thus:

  • increased rentability,
  • lower gap periods and
  • reduced regulatory risks

attached to high performing energy-efficient commercial/residential properties were all NEBs that need to be considered within future business strategies he agreed.

The session had I hoped started to alter the perception of this CEO, over his strategic options and how sustainability could assist in safeguarding the business’s longevity.  It had also raised scenario that could go forward into the boardroom for further debate and consideration.  That was a satisfactory start, because sustainability in business is dependant on industry leaders feeling comfortable in taking the lead on sustainability initiatives in a pro-active manner rather than reacting negatively when the opportunity has passed or when new regulation demand change.

However, the wider strategic impression I was left with after our session was that energy efficiency and investment practices remain unaligned in the UK property marketplace. The buildings sector clearly has a significant role to play in offsetting future carbon releases and in mitigating future carbon use, yet the regulatory energy policy and investment routes remain confusing as to whether they can ultimately drive a +1.5oC climate change future or just contribute locally to energy efficiency.

The regulatory preference over the last decade has clearly been aimed at direct grants and subsidies for home owners.  Whilst successful in general, how much greater would have been its success if it had been aimed at achieving greater standardisation in energy efficiency within the new build developments over the last 10 years?  This may reflect political caution when dealing with the sector or that policymaking is still more comfortable with the small subsidy model as they are easier to administer and communicate out to society.  Yet there is clear evidence that when scaled up, energy efficiency schemes are easily replicable and just as easily scalable.  They also have a verifiable ROI, help offset the switch to a low-carbon economy, low carbon cities & their air quality, and can build employment capacity within the construction service marketplace.

Let us be braver in future as the potential monetary value and benefits of energy efficiency can be just as great to developers, financiers and government as the societal value of a households energy reduction savings!

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At Leading Green, our approach to sustainability in business consulting encourages our clients to look closely at their own internal leadership strengths.  Helping them adopt an inquisitive state of mind and supporting them in how sustainability can support their long-term business strategy.

 

Corporate Social Responsibility – Why change? Why Bother?

The meeting with the Board hadn’t started well. Asked in by the Company Secretary to facilitate a group discussion on corporate social responsibility (CSR) and its role in next year’s corporate plan, I should have been warned by his earlier remark that they were a ‘lively group!’

‘Greenwashing’ had been the first utterance from the Finance Director, which at least indicated an appreciation of CSR issues and terminology, but it was soon clear that the Marketing and, surprisingly, the HR Director were of the same opinion.
I was starting to admire the Company Secretary and the challenges he had admitted to in earlier conversations. The company was doing well, but stuck strategically.  He also wanted to lay down a stronger sense of accountability and governance within the Board, helping them develop collectively as a group in their strategic thinking.  The symptoms were all too apparent in this well-respected food manufacturing & processing company – there seemed to be no long-term strategy only a focus on today’s problems, no one had direct accountability for SHE leadership only a collective awareness of ‘problems’, ‘brand’ was indelibly linked to ‘marketing & sales’; with ‘cost and efficiency’ left to Operations.
Corporate Social Responsibility (CSR) should not be a new concept for any Board or executive group – although many still see it negatively in terms of business irrelevant; box ticking in supplier relationship dynamics; window dressing designed to improve company image and PR; or feel good brownie points with staff or the local community.
So, it was in this Boardroom. Why should these executives and businessmen engage with CSR concepts when they felt little personal connection with the subject and had other more pressing issues?

Strangely the first chink of light came from the Finance Director. I had run through the generics of CSR and was starting to bring the concept back to how it could align with their business and what it seeks to achieve going forward.

‘Build sales, margins and client relationships!’ was his interjection ‘Explain how CSR can deliver these!’

CSR failures can have clear negative impacts on a company’s reputation and financial fortunes, so 5 good reasons why CSR should be important to you:

  1. Because your competitors are already thinking about it in their Boardrooms – there have been too many food hygiene scandals over the last few years.
  2. Your clients and customers want you to do it.
  3. Because all things being equal – price, quality, service, timing, etc, consumers tend to lean towards food brands with the better ethics.
  4. Because some of your competitors are already doing it.
  5. Because your bottom line, access to prime resources and ultimately brand value will suffer if you don’t do it start to consider it as a business economic option

There are a lot of questions here that every board should take time to examine strategically:

  • Why are our competitors thinking in this way?
  • What competitive angle do they perceive?
  • How are we perceived on these criteria?
  • etc

Many executives, through unfamiliarity, miss out on making the most of CSR practices as an added business tool. When you start to examine your corporate social responsibility, it is easy to get side tracked into the PR spectrum – it is a good feeling and a news-worthy story to hand a cheque out to a local charity, or allow staff volunteering days. You assume that the charity and the staff will be able to do good things with the money or time. This can be a great way to develop your employees, build team working and help them feel engaged with the local community, but it doesn’t give you a business strategy to build on.

These benevolent approaches often have little vision, or clear direction, which means identifying their ‘value’ becomes harder, and why often executives see little clear benefit in CSR or what it is achieving.

Products that are good for People, are good for Society, and are also likely to be good for Business

The first thing a Board must be clear on is what it is trying to achieve as a business, or even what it is trying to distance itself from.  It may be that you are picking up feedback or on consumer trends such as the growing awareness around food welfare, future resource scarcity, single use plastics or other sector specific issues and you want to reassure your customers that they can trust you.

The first thing a Board must be clear on is what it is trying to achieve as a business, or even what it is trying to distance itself from.

The next step is to build the conversation around what difference you would like to make, where you wish to position the company, and to investigate what strategic options deliver on that aim. Smart CSR is about using the power of business to improve the world, in a way that safeguards or enhances your long-term corporate interests. It doesn’t hurt a business to have “something else” in its brand locker that helps you stand out from your competitors, or to be have seen to have taken early steps in advance of crisis.

The best CSR programmes are ones that can relate back easily to your business. Used strategically internally or externally CSR helps organisational leaders and their teams engage in big picture thinking. Not only will being involved in CSR help boardroom dynamics – it forces people to come out from their power silos and think collectively as a group in terms of wider organisational sustainability, governance and brand reputation issues. It also helps executives link financial & non-financial intangibles with long-term growth and market sector issues.

As for the Finance Director, his parting shot after we had discussed my past experiences of working in the energy sector.

‘Did Enron have a CSR policy?’

‘Yes, and it was clear when I worked with them on a co-venture with ScottishPower that they didn’t follow it!’

‘We don’t want to be an Enron or a 2SFG (an earlier food processing firm scandal)

No idea where to start with your CSR strategy? Give us a call, we help businesses develop smart CSR strategies that are strategically aligned with their business goals.

This article updates an earlier Linked in post