Posts Tagged ‘sustainability’

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Scaling Sustainably

Posted by: Ira

I am sometimes skeptical when CEOs claim to be pursuing a just cause. I think companies often portend to be progressive simply for publicity’s sake, and because they know it is what their customers want to hear. But I recently learned about efforts by two corporations to put a social and environmental twist on their operations that seemed to go beyond lip service to corporate social responsibility. The companies are UK retail giant Marks & Spencer, and Unilever, the British-Dutch multinational that makes consumer goods such as Hellmans mayonnaise, Dove soap, and dozens of other well-known brands.

M&S CEO Marc Bolland gave a talk at London Business School and (among many other topics) relayed his experience of chairing a session at the World Economic Forum in Davos for the CEOs of major consumer goods companies. Coke, Pepsi, Procter & Gamble, Unilever, Nestlé… they were all there. Rather than debate the best way to cut costs, or prophesize about the next big trend in shampoos or snack foods, the CEOs spent the session talking about sustainability.

This was Bolland’s pitch to the CEOs: He said the old way of doing things, in which the goal was simply to sell as much as possible with no regard for the scarcity of resources, wasn’t going to work anymore. He said it was particularly problematic given the birth of a massive middle class in China, estimated by some to be as large as 1.4 billion people within 10 years. He said the western tendency to accumulate possessions as a mark of success was unsustainable, and he said that our children had become fixated on role models who had “stuff” rather than who had accomplished anything. Coming from the CEO of a company that exists to sell “stuff,” it was striking.

The solution to this conundrum, said Boland, was manufacturing goods in more sustainable ways and also getting customers to consume in smarter ways. For their own part, M&S has one of the most respected sustainability plans on the books, called Plan A.

Unilever’s ambitious goal is to double its sales while at the same time cutting its environmental impact in half. What’s so interesting about both Bolland’s comments and Unilever’s commitment is that they go well beyond the environmental footprint of these firms’ own products: both companies are actually trying to change the behavior of their customers when it comes to energy use, water use, waste disposal, and more. With more than 2 billion customers, Unilever recognizes both its vast reach into people’s homes and that its products are inextricably tied to a wide range of environmental issues. For example, Unilever makes shampoo and washing detergent, products that are linked to water consumption. What has long been the purview of government and civil society, namely shaping how individuals use resources, is now central to the corporate agenda.

Unilever’s Sustainable Living plan received a lot of attention when it was first announced. Since then, the company has been working to follow up the hype with concrete action. Key to its success will be a fresh approach to marketing, one that recognizes increasing sales isn’t the sole imperative. Last week Unilever Chief Marketing Officer Keith Weed spoke about this new paradigm for marketing at the Advertising Association Lead 2012 Summit. Here is a video from Unilever outlining how it might go about convincing customers to change their behavior.

There is no doubt that both M&S and Unilever’s efforts are small compared to the scale of the challenges posed by pollution, climate change, and over-consumption, and  compared to the important work being done by numerous civil society organisations. But at the same time, it is important to recognize that it is only when the biggest players step up to take action that we will see any real progress. Companies like M&S and Unilever are big enough (and have deep enough pockets) that if they follow through on their commitments, it will create a domino effect across the industry and the end result could benefit us all.

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Yesterday, straight after the investment class, about 30 of us (the MiF PTs 2013) ventured to a nearby Chinese restaurant to celebrate the new 4709th Chinese year of a black water Dragon by tossing and eating yusheng (鱼生) and wishing each-other great things in the year to come.

These festivities made my mind wander back to 2011 and re-evaluate things that happened in the past 12 months. Same day last year I was with one of my bffs (who was born on the same day, month, year as me) sipping negroni on Piazza Campo de’ Fiori in Rome.

One year and one day ago I was switching off the electricity in my London apartment, being forced to leave the country due to a recent change in visa requirements, as Mr. Cameron continued to bring to life his pre-electoral commitment to put emigration under control.

One year and two days ago I got a letter from Peter Johnson, congratulating me on being accepted to the LBS Masters in Finance course. Having taken the GMAT only 3 days prior to that, the news was a complete shock. I was at work and had to find a remote meeting room to allow myself a loud and cheerful celebratory dance. It felt really-really good.

So here I am now, in the very middle of it, and my experience so far cannot be farther from my great expectations in two major points:

First, the reason why I took the course was to advance my finance skills without getting too much fluffy stuff of MBA programs. I took corp. fin, accounting and macroeconomics in Chicago Booth, which was great and made me want to do a CFA. But when the bricks books arrived, I found myself deviating towards more healthy activities rather than spending my free time sitting on my bum trying to take in tons of information without an opportunity to ask a question. That interaction-lacking method of studying was depressing and put me off for a while. Similarly, I thought of LBS’s MiF as a painful remedy for those who felt the need to extend their knowledge in the field. I couldn’t have been more wrong. If you ask me now, what it’s like to do a MiF at LBS, my first word would be FUN. And you’d better take my word for it.

Second, it is not all about money. Our strategy professor, for example, is specializing in sustainability, and we spent 1/3 of the course discussing the benefits of green initiatives with representatives from Goldman Sachs, as well as hearing success stories from the industry; (some other time was spent modeling the prospects of Internet dating). And this responsible and reaching-out attitude is not being pushed top-down, – all the students in one way or another are involved in charity work, with some great successes like our co-student C. Coghlan’sGrow Movement”.

To sum up, although I am writing this now, I don’t feel any pressure or need to try and convince you to apply. The guys who I have met so far have so much in common with me that it feels like fate, so if you are supposed to be in LBS – you will get there one way or another. Doing a postgrad course, especially when it involves migration to a different country, is a big change. And there is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle than to initiate a new order of things; for the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order. (that’s not me, that’s Nicolo Machiavelli)

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One of the best benefits of studying at LBS is the access you get to a tremendous amount of events and conferences where you get to meet and hear from business leaders from all over the world. On Monday, I had the opportunity to attend an event from the Up Close series where Lord Sebastian Coe, Chairman of the London Organising Committee for the Olympic Games spoke about the vision and brand behind the London 2012 Olympic Games.

It is very embarrassing for me to admit that before going to hear Mr Coe speak, I had no idea that he won four Olympic medals and set eight outdoor and three indoor world records in middle distance track events. That’s impressive! But even more impressive (at least to me!) was Mr Coe’s speech where he focused on what differentiated London’s bid to host the Olympics compared to other great cities like Paris, Moscow, etc.

He talked a lot about building a competitive advantage by having a sustained, long-term vision and ensuring that you leave a positive legacy behind. If I understood him correctly, Mr Coe argued that London won the bid not because of being a great city with good infrastructure, but because his team was able to clearly articulate what the Olympics would do for people in the UK, such as encouraging children to get into sports and delivering the first fully-sustainable games in the world.

This line of thinking was not completely foreign to me. In fact, I think there is a movement going on today where in a changing world that is exceedingly complex, interconnected and unpredictable, businesses are realising that building resilience for tomorrow requires a focus on sustainability instead of on short-term gain.

Similar to Mr Coe, leaders at the recently held Davos also argued that a key challenge for forward-looking business leaders in 2011 and beyond will be to find the right balance between long-term value creation and pure profitability. This, they said, will require some “soul searching” for a lot of companies and continuous focus on operating as a valuable member of society, instead of just a product or service provider.

I agree and I think that as a result, businesses will also need to realise that they cannot operate in isolation and that leadership today means managing a range of complicated relationships in order to successfully address complex issues. Taking this stakeholder approach to sustainability will not be easy for many. But those who are patient and put the right resources and dedication in place to master it will benefit from continued growth and enjoy a unique competitive advantage in the new market reality.

What do you think? Is the sustainability movement building momentum and are businesses ready to navigate successfully through a complicated sea of stakeholder relations?

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