Is Business Sustainability Strategic? Giovanni Tordi CEO Sustainability Company

8/8/2019 Is Business Sustainability Strategic? Giovanni Tordi CEO Sustainability Company

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Business SustainabilityPublished Online in Sustainability Company (www.sustainabilitycompany.net)

Why Business Sustainabilityis Strategic ?

Lecture: 2By Giovanni Tordi - Sustainability Company CEO

Lectures on Business and Environment Sustainability for

Luiss University, Rome 2009/2010

In the medium long term the

enterprise must generate profit. Wehave seen that, if we concentrateexclusively on short term,originating profit is sensibly at risk.It is around this concept of risk thatbusiness sustainability is based:

SUSTAINABILITY = DEVELOPEMENT+ MITIGATION OF RISKS

Sustainability is therefore no longeressentially a concept with a socialand environmental dimension, butalso economic. In fact, a non-sustainable approach may cause theprogressive failure of the enterprise.What are the benefits deriving fromthe introduction of sustainability inthe conduct of business? Let usmake some example:

ANTICIPATE THE MARKET,INNOVATE

Introducing sustainability inprocesses and products, allowsinnovating and differentiating fromcompetitors. There are today manycompanies which, like Toyota andFiat, present hybrid models -

gasoline + electric or gas - capableof reducing consumption, improvingcost efficiency and reducing CO2emissions.

Consumption styles are modified.

The consumer is always moreattentive and available if, in case ofsimilar efficiency, in satisfying his allrequirements, he can obtain anindirect benefit for the environmentand for the society.

Generate an improvement inqualityIn many cases, one of the effects of

sustainability integration is theinduced improvement in the qualityof products.The reduction of the environmentalimpact of a given product throughthe modification of the productionmethod, represent a quality elementperceived by the client.A company producing cotton fiochad always suffered of problems

with the environment organization.This was caused by the fact that theplastic holder of the product was notbiodegradable and was polluting thesea.For this reason, when the companyfound a material that was absolutelybiodegradable still having the samestructural characteristics of theplastic holder, the effect on the

attitude of the environmental andconsumers organizations was highlypositive.


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Why is business sustainability strategic ?This holder was produced from cornmeal and was introduced in theproduction chain.

Reducing operational costs(example score reducing energycosts)Nowadays many companies are re-qualifying the energy system oftheir buildings. They are definitelyaware of the fact that energy was ahigh cost, which is subject toincreases caused by shortage offossil combustible materials.

The utilisation of new technologiesfrom renewable sources (solar,aeolian) allows savings of up to60/70% of energy costs and areduction of CO2 emissions.

Reducing waste and theenvironmental impactIn production processes but also inservices, disposal of scraps may be

optimized with substantial benefitsfor the environment. In the sector ofelectronic RAEE, some componentsof waste may serve to originate newproducts. Very often we can see thereconditioning of obsoletecomputers which may be reutilizedwhere there is no budget for thepurchase of machinery (schools,prisons).

This is a tangible example of wastemanagement with social andenvironment benefits.There are companies, like Nokia,which, annually, make handsetsrecycling campaigns.But this is also true in solidarity foodtrade with food bearing a closeexpiration date and serve a low costchain for poor families.

The Zero Waste Strategy, is nowcarried by 50% of cities in NewZealand, Australia, Canada, from

California, Oregon State and manymultinational companies (Toyota,Bell Canada, Xerox, HewlettPackard, and others). For example,

Xerox Usa estimates its Zero Wastepolicy has saved, since 1990, morethan $ 2 billion. Hewlett Packard inRoseville, CA has reduced waste by95% and saved 870,564 dollars in1998. Interface, Inc. Atlanta, GAhas saved more than $ 90 million.In 2000, the establishment of EpsonPortland, Oregon has reduced itswaste to zero and has saved $

300,000. In 2006, Toyota hasachieved the goal of zero waste inall its European plants.

Improving the workenvironmentOne of the fundamental elementsfor prosperity of companies is themanagement of human resources.To this end, the adoption of policies

in favour of employees is a keyelement for success.There are numerous cases ofwellness at work: companies whichopen the gyms for employees ornurseries for the children haveobtained a remarkable improvementin acceptance and productivity. InSpain, some companies haveallowed a longer rest period in the

middle of the working day to allowtheir employees to rest at home.In so doing, they have obtained aremarkable increase in theafternoon productivity. Integratingservices for employees in thecompany model is definitely asuccess element in attracting newtalents and keep in the company.In 2009, a survey of

MonsterTRAK.com found that 80%of young professionals interested inworking in an ambient that has a


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Giovanni Tordi, CEO Sustainability Company

positive impact on the environmentand 92% would be more inclined towork for a company environmentallyfriendly. A chain of fast-food

restaurants in the U.S., through astudy on employees, found a directcorrelation between the pursuit ofsustainable policies (organic food,waste reduction, energy efficientlighting, training, ....) and the abilityto attract qualified workers.

Reducing operational risksOne of relevant aspect of risk

governance is definitely that ofmitigating legal and insurance risks.It is sufficient to think of refundsmade by financial sector companies(bonds in default) for consignedproducts, which were not in line withthe risk profile of the client andhave not gone through asustainability examination.This has meant long and costly

processes that have generatedunbelievable recovery costs forcompanies.

Anticipating policy changesHaving a sustainability approach andfollow it up with a pro-activestakeholder engagement, oftenallows to anticipate times and toovercome, without a critical impact,

policy changes.In some European countries theintroduction of an energycertification is a mandatory elementto proceed in the sale of buildings(also in some Italian regions).Having foreseen a step ofcertification in the conduct ifbusiness and work processes is anelement of remarkable advantage.According to a study published in2008 McKinsey study, 80% ofmanaging directors expect new

environmental legislation, relating toclimate change within the next fiveyears and third in just two. Thosewho had expected an earlier trend,

have had more time to improvetheir standards.

Reducing reputation risksThe induced effect of havingsustainability integrated in businessis to be found in a return ofreputation based on facts.Many corporations invest millions ofeuro in publicity communication

aiming at the sale of their productsand trying to motivate a positiveapproach in the consumer.Actually, today, also thanks to thediffusion of Internet, whichrepresents an innovation for theconsumer to inform himself,reputation is more easily achievedwith facts.For this reason we start seeing in

some firms, departments in chargeof management of reputation risks.These are unites specialized in thepreventive evaluation of risks whichmay be caused by some companydecisions.At the same time, the incorrectintegration of sustainability inbusiness may cause a threat to thedevelopment of the enterprise.

Pollution risksIt is the effect of unsustainableprocesses. An incomparableexample is provided by the greatenvironment catastrophe caused bythe pouring of highly harmful andtoxic substances in theenvironment.Here are a few examples:

1976, the emission of dioxin inSeveso left the population w


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Why is business sustainability strategic ?ith a rate of deformed birth6.6 times higher than theItalian average.

IN 1984 the Bhopal pesticidesplant in India killed 3787people in just a few days afterthe discharge of 40 tons ofMethyl isocyanate. But stillnowadays, the mortality rateis 2.4 times higher thanNational average.

After the explosion of the 4threactor of a nuclear plant in1986 the population ofChernobyl decreased from350.000 to 400 habitants.Debris are still easily findablearound all EU.

The British Petroleum isordered to refund 9.5$ billionto the Mexican Gulf population

after a leak of more than 4million barrel of petrol in theocean.

These catastrophes have causeddeath to human beings, upset thelife of thousands of persons anddamaged the environment in adramatic way but nowadays we talkabout pollution also in finance.

We should consider the so called toxic bonds, I.E. bonds whosevalue, all though submitted to theevaluation of financial analyst ofimportant rating agencies (Moodys,Fitch) are thwarted, dissipating lifesavings of many investors.We can remember the case ofLehman Brothers, historicalcompany in the world of

international finance, with a highrating (A+) which, because of

speculation in housing in the USA,have gone bankrupt.The impact of this failure has beendramatic not only for thousand of

employees losing their job but alsofor all those people which werebadly advised and lost their lifesaving.

Problems of products or servicesAlways because the superiorinformation capacity through acommunity web, if a given producthas some problems, the network

puts it immediately in evidence.There are non-specialized blogs ofpeople having their ownindependent opinion about productsand services, throwing under a goodor a bad light the work of somefirms.One example could be the Dell case,a company which producescomputers and entered the market

with highly competitive prices.The problem evidenced byconsumers was in the customer careand assistance.For these reasons, after a shorttime, an independent campaign waslaunched attacking the company ininternet. This originated a heavydecrease in sales and forced thecompany to make improvement and

guarantee a better after sale serviceto clients.If Dell had immediately integratedsustainability, this attack to theirproducts and services was not goingto take place.

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Is Business Sustainability Strategic? Giovanni Tordi CEO Sustainability Company