A recent survey on sustainability in Irish business shows how much work still needs to be done in convincing indigenous companies to think green, writes JOHN HOLDEN.
‘SUSTAINABILITY IS how you make your money rather than how you spend it.” He may have been paraphrasing, but the environment executive at Musgrave Group, John Curran, was certainly summing up the attitude of his employer. As one of only a handful of indigenous businesses in the country with a dedicated environment executive, Musgrave’s record in relation to sustainability is better than most.
In a survey on sustainability in Irish business by PricewaterhouseCoopers (PwC) the findings are predictably unimpressive. While 61 per cent of participating Irish chief executives said sustainability is important for their business, only “21 per cent have actually developed strategic objectives, 10 per cent have set specific sustainability targets and the majority (72 per cent) do not report on sustainability to external stakeholders”.
Among other findings, the survey discovered that 43 per cent have introduced measures to reduce their carbon footprint, but only 15 per cent say that they actually measure it. “As is often the case with these surveys, it confirms what we already understood to be the case in the market,” explains Robin Menzies, PwC Ireland leader in sustainability practice and one of the three speakers at a business breakfast this Thursday in Dublin entitled “Sustainability: From Strategy to Communication”.
“The key findings show a decline in confidence in terms of the economic outlook, but businesses are looking at cost reduction in different ways than before,” says Menzies. “Sustainability, and particularly the carbon footprint, is becoming a recognised part of business activity. Despite that, there’s a deficit in terms of the actual steps being taken to address it.”
The bottom line for business is profit. So the cynic would not expect firms to take social or environmental concerns into consideration when developing strategic objectives. But food and water supply, carbon tax and energy security issues are all now inextricably linked with the corporate cost base.
Did the survey reveal any patterns in terms of the types of companies that performed well regarding sustainability? “Not really,” says Menzies. “Perhaps the ones which are most impacted by it look at it earlier – certain sectors like energy. Generally speaking though, companies that are well run tend to adapt quicker to change.”
“Change for change’s sake” is rarely the mantra in business. If a model works it makes sense to keep it. However, increased pressure from the consumer has meant the reputation of any business is hugely affected by their approach, or lack thereof, to sustainability.
Ian Powell, chairman of PwC UK and a member of the World Economic Forum (WEF) Taskforce on Low-Carbon Economic Prosperity, which had its launch at the G20 summit in London last month, has seen this first hand. “I’ll give you an example of one major company we work with,” he says. “I can’t mention their name, but suffice it to say this is a globally recognised brand. They are currently completely overhauling their business model based around sustainability. Why? So that a few years down the line they’ll be able to take a market lead in terms of sustainability and ethics. If they don’t, they believe the consumer simply won’t take them seriously any more.”
Most indigenous companies are not at that stage yet. Alan McGill, a partner at PwC UK specialising in non-financial performance measurement, sustainability and climate change, suggests focusing on the importance of taking a more holistic approach to company reports. “Current reporting is dominated by financial strategies, and the competitive edge is based on that financial performance,” states McGill. “Of course this is an important aspect of business, but everyone must begin to consider the context in which that financial performance is happening – the environmental and social contexts.
“Reporting is going to have to fully reflect the requirements of sustainability in order to understand those critical interdependent relationships. So financial and non-financial data are going to become clearly integrated. All business objectives should be seen not just in terms of profit margins, but also in terms of their environmental and social value.”
This will mean an increase in positions such as that of John Curran’s at Musgrave Group. Environment executives are more common in the UK, and still relatively rare in Ireland. “Sustainability is embedded in this business,” states Curran. “It reduces costs and improves efficiency. Energy and waste management make sound business as well as environmental sense. I’ve heard a lot of commentators saying that, in light of the recession, the era of sustainability is dead. I believe the opposite may come to pass, as we are now focusing our attention even more on making the business leaner and more efficient. Sustainability features very much as part of that strategy. Many people don’t get it. They think it refers to the handing out of cheques to charities. That’s only a part of it. To quote someone else, sustainability is how you make your money rather than how you spend it.”
He is quoting Ugandan PR specialist, Jimmy Kiberu, who was referring specifically to corporate social responsibility. However, the phrase lends itself just as well to an environmental context.
This has certainly been the case in Costa Rica where, in the 1990s, the government did something no country had ever done by putting energy, mines, environment and water under one ministerial portfolio. Environment ministers are often perceived as being the politicians responsible for protecting natural resources from business interests, but the Costa Ricans have proven that enterprise and environment portfolios need not be mutually exclusive. The country now gets 95 per cent of its energy from renewable sources: hydro-electric power, wind and geothermal.
Powell expects such collaborative thinking will become more common. “The very fact that we had the UK’s secretary of state for business, enterprise and regulatory reform, Peter Mandelson, and secretary of state for energy and climate change, Ed Miliband, sitting next to each other at the WEF Taskforce on Low-Carbon Economic Prosperity conference shows that there is an awareness of the need for joined-up thinking on these issues,” he states.
Closer to home, can Irish businesses really be expected to appreciate the potential in reducing their carbon footprint, when Tánaiste and Minister for Enterprise Mary Coughlan and Minister for the Environment John Gormley appear about as well suited as a landfill in Glendalough? “Government certainly has a role to play in terms of guidance and fiscal incentives for businesses to be more sustainable,” says Curran. “However, we are traditionally not a huge industrial country. We don’t have an enormous manufacturing base compared to Britain, where sustainability seems to have evolved a lot more. You can see more of a consciousness of the issues in some of the multinationals based here. It seems indigenous businesses don’t take the issue seriously as long as there are countries like China emitting carbon levels in a day that Ireland would produce in a year.”
That type of attitude will not stand up to scrutiny as the world’s environmental situation continues to deteriorate. “We need to influence countries like China as much as we can,” states Powell. “Assuming somebody else is going to do it, otherwise known as ‘social loafing’, is not a sensible way forward.”
