Greening Enterprises: How to Assess and Develop Your Organization's Drive Toward Sustainability

byStephen [email protected]

David Erne [email protected]

Alan [email protected]

Greening EnterprisesHow to Assess and Develop Your Organization's Drive Toward Sustainability

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Sustainability is all the rage these days, much to the confusion of many organizations. Covers of Business Week, Fortune, the Economist and Vanity Fair, among other publications and diverse media channels, have touted the value of transforming staid, run of the mill organizations into “green enterprises.” These enterprises place a premium on protecting the environment in the products they make and acquire or the services they provide, in how they manufacture products, and in how they deliver brands and services to customers.

But for many organizations, the thought of going green, while perhaps desirable on the surface, raises at least two perplexing questions that are increasingly difficult to navigate. The first is, "Why?" Beyond altruistic reasons, many corporate executives and agency chiefs struggle to delineate the benefits that a strategy built on sustainability actually brings to the organization. The other question is a bit more intractable: "How?" Organizations interested in sustainability face a series of challenges in implementing environmentally conscious business initiatives.

Booz Allen Hamilton has developed a methodology to resolve these complex issues. By pairing what we call the Green Pulse Check and the Sustainable Green Enterprise Framework, we can diagnose and help improve an organization’s capabilities to integrate environmental considerations for enhanced business value and provide a clear roadmap for improving environmental performance across multiple dimensions at all stages of development and execution.

Untangling the Questions The answer to why sustainability should matter to an organization goes well beyond merely demonstrating good stewardship of the environment for the sake of appearances. Instead, sustainability’s true value lies in supporting the ability of the enterprise to thrive as environmental conditions and attitudes towards the environment change—and resource limits are realized.

In recent years, numerous private and governmental sector organizations have faced tangible impediments to their success as a result of environmental concerns and finite resources. For example, the global beverage industry has come under increasing scrutiny from concerned citizens in sensitive geographies regarding demands on local water supplies, prompting the need for concerted corporate responses to address stakeholder concerns and maintain corporate reptutation. Personal products manufacturers have seen their market share and brand popularity erode due to supplier noncompliance with hazardous material content restrictions. Meanwhile, the Department of Defense is working with neighboring communities to promote sustainable development around military bases to increase natural habitats while minimizing encroachment that impacts the military's ability to adequately train troops.

Sustainability efforts are most effective when approached strategically and systematically and are aligned with the organizational mission. In those cases, using resources (air, water, and land) more efficiently:

a) Ensures their continuing availability for current and future activities and can deliver cost savings;

b) Provides a competitive advantage for responding to regulatory change (carbon cap and trade programs or emerging contaminants);

c) Enhances brand reputation to attract new customers and employees and to create a better relationship with the community;

d) Meets changing supply chain requirements; and

e) Promotes greater levels of innovation, productivity, and risk management.

Greening EnterprisesHow to Assess and Develop Your Organization's Drive Toward Sustainability

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Another question that the prospect of implementing sustainability raises—How do I do it?—is more daunting, because it involves taking large steps that could impact the organizational business model and culture.

Organizations interested in sustainability often find themselves wondering:

• How to establish enterprise-wide environmental goals and objectives

• How to identify current sustainability processes in key areas

• How to assess sustainability gaps

• What approach to use when developing sustainability initiatives

• Where to start integrating various tactics, in a focused way, to maximize results

Green Pulse CheckAn organization’s environmental management maturity can be viewed along a continuum from compliance to integration and, ultimately, to shaping strategy and leadership (see Exhibit 1).

At the lowest levels of sophistication, an organization could be described as reluctantly embracing environmental compliance. In these stages, the environment is seen as an inhibitor to accomplishing a mission and the organization merely follows the letter of the law typically on a reactive basis—and nothing else—in its adoption of green practices.

In the middle of an organization’s evolution is environmental management. At this point, the environment is considered part of existing operations. The organization may embrace such things as advanced recycling and pollution prevention (P2) programs, and may have implemented energy efficiency

Exhibit 1 | Environmental Management Continuum

Source: Booz Allen Hamilton

u

u

u

u

Environment seen as ìnhibitor to mission

Stopping the bleeding `Reactive compliance `

Environment seen as a `cost to accomplishing mission

Letter of the law `regulatory complianceLittle to no stakeholder ìnvolvement

Environment considered às part of existing operations

Environmental Mgt. `System (EMS)Advanced recycling and `P2 programsEnergy efficiency for `cost reductionLittle to no stakeholder ìnvolvement

Business opportunities ìntegrated with stakeholder interests

Corporate Social `Responsibility PlanningGreen buildings `Natural infrastructure `managementBusiness operations/ ùnits developed to address unique environmental opportunitiesRegulatory shaping `

Environmental concerns `fully integrated with overall mission and business strategy

Product lifecycle design `Lifecycle and supply `chain managementMarket identification and `shaping for new products and services

Environmental Compliance–

Ad Hoc

Environmental Compliance–

Managed

Environmental Management

Mission Alignment

Integration and Leadership

Internal and Tactical Focused

External and Mission Focused

Risk Management Operational Excellence Strategic Shaping

Mission Enhancement{

Compliance

u

3

mechanisms to reduce costs—but there is little to no stakeholder involvement. Both of these categories fall under the umbrella of internal and tactical focused.

The top levels of the continuum are populated by organizations that are focused, first, on mission alignment. At this stage of maturity, stakeholder environmental interests drive opportunities to support and enable the organization’s core mission. Moreover, the organization places a premium on corporate and social responsibility planning, including a low carbon footprint, natural infrastructure management, and business units developed to address unique environmental opportunities.

The most environmentally conscious organizations practice environmental integration. In these organizations, environmental concerns are fully integrated with the overall strategy; the organization emphasizes sustainability in product lifecycle design and supply chain management, as well as in shaping perceptions for new products and services provided to create new value propositions. Organizations at the top two rungs of environmental maturity can be characterized as external and mission focused.

The Green Pulse Check uses these possible stages of environmental management maturity as the basis of an initial diagnostic profile of an organization across five critical capability dimensions.

• Strategy and Leadership. How well defined are the company’s environmental goals and objectives? How well does senior management communicate them? Are all of the environmental threats to the mission and the environmental consequences in the product or service lifecycle clearly measured? For example, is the availability of land and water resources identified as critical for future operations?

• Policy and Guidance. Are the environmental policy roles and responsibilities clear? Are they—and the policy itself—tied to the organization’s mission and strategic objectives?

• Organizational Capacity. Has a formal environmental organization been established,

including explicit definition of reporting, roles, and authorities? Have adequate resources been allocated to the environmental organization, including a full complement of policy, technical, and management staff? Are environmental considerations formally addressed in routine budget and resource planning?

• Implementation. Are robust programs and action plans in place to translate long-range environmental strategies into tactical actions? Are environmental considerations integrated into all core organizational processes (planning, acquisition, R&D, etc.)? Have formal communications and training programs been established to ensure requisite competencies and culture? Does the organization proactively engage in environmental alliances with regulators, nongovernmental organizations (NGOs), and industry groups?

• Monitoring and Reporting. Are mature assessments processes (facility, product, supplier) conducted to manage risks and promote business opportunities? Are periodic audits and inspections supplemented by ongoing monitoring and measurement controls? Is there an ongoing system to monitor progress against established performance measures?

With each of these capability dimensions addressed (see Exhibit 2 for sample Green Pulse Check capability descriptions), the results of the diagnostic are then consolidated into a snapshot report to provide a baseline for improvement. In this Green Pulse Check report, specific elements of the capability dimensions are rated from 1 to 5 (1=Ad Hoc; 2=Risk Avoidance; 3=Risk Management; 4=Mission Alignment; 5=Integration and Leadership) to illustrate how far along the organization is in each aspect of its sustainability program.

Sustainable Green Enterprise FrameworkThe Green Pulse Check, although critical, is only the first step to formulating a sustainability strategy. Armed with this assessment—showing an organization’s strengths and gaps, opportunities and

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Exhibit 2 | Green Pulse Check Sample


successes, the next step involves the very difficult job of determining precisely what to focus on and how to implement it. That’s where the Sustainable Green Enterprise Framework comes in. Put simply, the diagnostic (Pulse Check) pinpoints vulnerability and the treatment plan (Framework) offers the actionable roadmap for improvement.

Each phase of the Framework—Strategic Planning, Options Analysis, Implementation, and Monitoring and Improvement—defines and integrates discrete work activities to build holistic solutions key to high performing green organizations (see Exhibit 3).

• Strategic Planning. In this initial stage, a determination is made about which sustainability improvement opportunities the organization will initially pursue, as informed by internal and external benchmarking and gap analysis. To do this, high-

level risks and opportunities are evaluated for how closely they dovetail with the business’s mission. Those that appear to appropriately align with mission requirements and key organizational priorities are categorized by whether they would be enterprise-wide efforts or focused on specific organizations, products, processes, or media. From that, an integrated project team can be formed and a work plan of improvement recommendations (project duration, resources, and scheduling) can be developed. The common denominator among leading government and private sector sustainability programs is a carefully forged plan supported by top management that is effectively communicated throughout the organization—in all, to provide the strategic vision and imperative for positive change and responsible behaviors.

Dimensions Environmental Compliance Environmental Mission Alignment Integration and Management Leadership

1. Strategy and Leadership

2. Policy and Guidance

3. Organizational Capacity

4. Implementation

5. Monitoring and Reporting

Environmental function focuses on •reacting to operational needs and meeting the letter of the law

Media-specific, compliance- •oriented policy

Dedicated organizational unit •with mid-level positioning and limited visibility

Limited, compliance-focused •technical staff

Limited action planning •

Marginal interactions with planning •and operating groups

Limited, technical-focused training •and communications

Involved with regulator only for •compliance reporting and reviews

Compliance-oriented inspections •and audits

Regulatory-imposed reporting •

Environmental management is an •integral part of operationsEnvironmental goals and objectives •exceed compliance obligations

Enterprise-level policy and guidance •that promotes environmental performance and risk management

Dedicated organizational unit with •access to senior management Adequate levels of environmental •management staff

Formal action planning •Interactions with planning and •operating groupsEnvironmental performance •focused training and communications Coordinates with regulator on •regular basis to address adequacy of permits

Environmental systems and •Ops risk assessmentsRegular monitoring •and measurementPerformance reporting •

Environment viewed as contributing •to the organizational mission

Enterprise-level policy and guidance •that reflect mission priorities and strategic objectives

Dedicated, enterprise-wide •environmental structure with senior positioningFull complement of strategy, policy, •technical, and management staff

Action planning reflects •organizational strategic objectiveRoutine interactions with all •relevant internal groupsFormal training •and communicationsWorks with regulator to achieve •mission while exceeding regulatory requirements

Tiered assessments (material, •supplier, facility, fleet, Ops)Ongoing monitoring •and measurementManagement reporting •

Environment seen as enhancing •mission value

Strategic enterprise-level policy •and guidance that enables mission and strategic objects through value creation

Dedicated, enterprise-wide •environmental organization reporting to Secretariat or Administrator officeSelf-sustaining internal •environmental resource pool (leveraging Centers of Excellence, Shared Services)

Formal action planning integrated •into overall business planningPlanned and scheduled interactions •with relevant internal groups and external stakeholdersStrategic internal/external training •and communications embedded into core business processesProactively collaborates with •regulatory agencies to ensure mission growth can occur

Business case evaluations •Continuous monitoring •and measurementInternal and external •stakeholder reporting

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• Options Analysis. This is the feasibility and suitability phase, when the projects identified as potentially valuable in the Strategic Planning analysis are rigorously tested against feasibility factors to determine whether they have a strong business case and will be supported by stakeholders. For private companies, such things as lifecycle cost, return on investment (ROI), internal rate of return (IRR), cash flow analysis, and net present value are measured. For government agencies and non-profits, simple payback and cost-benefit ratios or cost-effectiveness analyses are also computed.

• Implementation. With the feasibility study completed, the sustainability program can be put into motion. To do this, organizations can build off of the options analysis to create a Greening Business Action Plan that defines the mission, goals, objectives, and organizational structure of the campaign. In subsequent years, this document should be updated with a review that shows: progress against established management and

technical metrics compared to previous year; compliance data; and actual end of year spending versus planned spending. Finally, there should be a section with short descriptions of major sustainability initiatives for the upcoming fiscal year. To support optimal implementation, training and awareness programs, outreach, and guidance serve as important enablers for program traction and ultimate success.

• Monitoring and Improvement. This phase entails several interrelated activities to assess sustainability performance, identify lessons learned for future application, report to stakeholders to promote accountability and transparency, and conduct management reviews to determine the appropriateness, relevance, and suitability of sustainability initiatives for ongoing improvement and value creation.

a) Audits and Performance Assessments. Routine, systematic assessments of sustainability accomplishments and progress towards

Exhibit 3 | Process Phases of the Green Pulse Check


Monitoring and Improvement

ImplementationOptions Analysis

Strategic Planning

Green PulseCheck

1 2 3 4

Objectives Formulation �

Scoping �

Baselining �

Work Plan and �Scheduling Coordination

Benchmarking �

In-depth Gap Analysis �

Risk Assessment �and Prioritization

Draft Improvement �Recommendations

Options Identification �and Profiling

Technical Feasibility −Analysis

Stakeholder Analysis −

Economic Analysis −

Best Fit Selection �(including key performance measures)

Business Case Analysis �for Transformation

Action Planning �

Development and �Deployment Roadmap

Policy and Process �Design and Engineering

Performance �Management Framework

Key Indicators −

Performance −Plans/Systems

Resource Management −

Training and Competence �

Outreach and �Communication

Audits and Performance �Assessments

PMO/Project �Management

Lessons Learned and �After-Action Reviews

Internal and �External Reporting

Management �Recalibration

established objectives and targets provide essential input on the effectiveness of program performance. Organizations employ a combination of leading and lagging indicators to assess tactical accomplishments as well as overall management effectiveness in minimizing negative impacts.

b) Lessons Learned and After-Action Reviews. Building on the outputs of audits and performance assessments, lessons learned and after-action reviews provide valuable information about positive and negative performance. Frequently, these activities yield insights into internal best management practices and successful operating models that can be further leveraged across the enterprise.

c) Internal and External Reporting. Internal reporting of sustainability successes and performance stimulates accountability, promotes healthy competition among peer organizations, and feeds program momentum. Best-in-class reporting processes emphasize transparency, timely data capture and dissemination to internal organizations, and the use of technology tools to ensure efficient and accurate information exchange. With growing stakeholder scrutiny of environmental responsibility in fulfilling legal and regulatory mandates, organizations must complement internal reporting with formal external reports and outreach communications. For example, in mid-2008, the US Air Force and the US Army issued separate comprehensive sustainability reports that followed Global Reporting Initiative (GRI) guidelines, which is considered a standard for environmental performance disclosure. These efforts represented the first publication by the Air Force and Army of enterprise-wide performance reports covering Triple Bottom Line (environmental, social, economic) sustainability factors; it clearly illustrates the governmental trend towards increasing levels of transparency and accountability in environmental issues.

d) Management Review and Recalibration. While many organizations collect performance data, those that excel translate these inputs into discrete actions to build institutional capability, instill corrective or preventive actions, and promote continual improvement. Formal

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1 http://eedontmiss.blogspot.com/2009/02/ncs-environmental-success-stories.html2 http://walmartstores.com/Sustainability/7951.aspx3 http://sustainability.baxter.com

Examples of Notable Public and Private Sector Sustainability Implementation Efforts

The State of North Carolina and the MilitaryThe State of North Carolina has cooperated with the military bases at Fort Bragg and Camp Lejeune to protect 37,000 acres of land. This land helps the military bases by providing lands to be used during training exercises but also acts as protected habitat for the local wildlife.1

WalmartWalmart has implemented several efficiency programs in their stores, including elimination of unnecessary lighting in store vending machines—saving the company an estimated US$1.2 million per year. Further, through improved green technologies and logistics, Walmart’s vehicle fleet has been able to reduce its greenhouse gas emissions by 38 percent domestically between 2005 and 2008. Walmart believes that their greening efforts saved the company almost US$200 million last year.2

Baxter InternationalBaxter International, a medical products and services company, reported in their 2008 Sustainability Report that their waste management and water management efforts saved the company an estimated US$11.9 million in 2008.3

management reviews have become commonplace as many government organizations respond to Executive Order requirements for implementing Environmental Management Systems (EMSs) to address environmental requirements. However, the value of this activity is not simply in the individual management review—typically conducted annually, but instead in management’s engagement and the institution’s commitment to create a culture of excellence using these reviews as a starting point. By leveraging past successes and overcoming performance deficiencies through periodic review and recalibration of sustainability policy and strategic goals, organizations can more effectively promote and routinize sustainability to ensure ongoing mission value.

Conclusion With so much riding on sustainability and “going” green, in most organizations the confusion about how and why dissipates relatively quickly; the gains become obvious and the necessity becomes paramount. But the gap between understanding the need and

implementing a successful, long-term sustainability program is frequently a wide one that many organizations struggle in vain to close. With the Green Pulse Check and the Sustainable Green Enterprise Framework, Booz Allen offers a straightforward, step-by-step approach to aid in this effort. The ultimate aim is simply to diagnose and improve an organization’s ability to integrate environmental considerations for enhanced business value. When that’s achieved, environmental awareness truly has the potential to become a lucrative strategy.

Ready For What’s Next At Booz Allen Hamilton, we take pride in helping the federal government prepare fully for upcoming challenges. With deep expertise in the complexities of today’s fast-changing energy markets and decades of experience helping governments optimize their use of facilities, installations, and other infrastructure, we are uniquely positioned to look ahead and collaborate with our clients on energy efficiency, green IT, and opportunities and challenges related to climate change legislation.

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Wolf Trap Goes GreenRecently, Booz Allen partnered with the Wolf Trap Foundation to translate goals for being carbon neutral, generating zero waste, and inspiring enduring environmental practices within the performing arts into tangible strategies to position itself as a leading model for sustainability amongst the performing arts community.

Booz Allen initially developed the foundation’s baseline and strategic vision for its greening initiatives in collaboration with Wolf Trap’s senior leaders and volunteer greening team, and the National Park Service (NPS). These efforts provided the foundation for structured sessions to help the foundation and NPS develop a strategic plan to support desired sustainability goals. Using

integrated planning and performance management capabilities—coupled with subject matter expertise in renewable energy and energy efficiency, green procurement, waste management, and green buildings, Booz Allen supported the development of a comprehensive action plan with near- and long-term objectives, initiatives to achieve those objectives, resources, project benefits, and metrics to measure progress.

A communications plan was prepared in parallel with planning efforts to create a culture of responsibility throughout the organization and to engage the greater Wolf Trap community in sustainability initiatives.

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