As large enterprises jump on the sustainability bandwagon, is it time for medium companies to engage on green issues? M Institute correspondent Joe Lickens looks at some corporate announcements to see how much is for real, and how much is flim-flam.
For those who were unsure of the need for decisive action against climate change, last year’s Stern Review was pivotal. At last, the potential ramifications of climate change were spelled out in business terms – as “the greatest and widest-ranging market failure ever seen”. Public pressure on businesses mounted accordingly. But, while some companies are adopting green strategies that are genuinely impressive, others are still dragging their heels.
Since the issue of climate change was finally admitted to the corporate agenda, the pace with which it has risen up the priority list is remarkable. In the most recent Ipsos Mori poll, eighty percent of respondents said that a company’s environmental reputation would affect their purchasing decisions. As M Institute co-founder and chairman, Paul Druckman points out, “You can take competitive advantage by showing that you are becoming a greener company.” Druckman is involved in a number of initatives exploring how organisations will account for sustainability issues.
All this attention on green issues has led to some very positive changes but, in some cases, companies seem to be getting ahead of themselves, making spurious statements of greenness. This week, Shell’s advert depicting an oil refinery emitting flowers, not smoke, was deemed to be in breach of industry code clauses on truthfulness and environmental claims.
Other companies have made bold, but tenuous pledges of imminent carbon neutrality. For example, in May this year, Alpro Soya announced plans to become the first carbon neutral food manufacturer in the UK, but didn’t offer a timescale for the transformation and may not have even assessed its carbon footprint at the time of the announcement.
There is of course the danger that, as these declarations become increasingly ubiquitous, they lose their impact to the extent that even companies that are making a genuine effort are viewed with skepticism. However, it is not only the cynicism behind some of the claims that is the problem. With the concept of carbon neutrality, for example, comes the sticky issue of supply chain. Who exactly is accountable for the carbon emissions involved in the numerous stages of a product’s creation? Paul Druckman points out that “companies saying they’re going to become carbon neutral need to make sure their suppliers follow the same path.” So many medium companies that happen to be suppliers of large companies involved in carbon mitigation schemes may well need to track their own emissions in the supply chain.
Some companies have already developed initiatives that focus on their supply chain. Rather than entering the minefield of conventional offsetting, Cadbury's Purple Goes Green campaign will offset emissions by investing in green technologies for its suppliers. Unilever has joined forces with the Carbon Disclosure Project to work out its suppliers' emissions.
Reducing environmental impact throughout the supply chain does not have to mean huge expense either. According to the Carbon Trust, "It can ultimately help all of business make better informed decisions in product manufacturing, purchasing, distribution and product development by considering the costs and liabilities that exist whenever carbon emissions are generated."
Whether or not you believe your business has a duty to act against climate change, avoiding the issue is no longer a viable option. Reducing environmental impact should not be seen as an added burden but, instead, as an opportunity to hone business processes. It seems we may be witnessing a fundamental shift in the functioning of business. Druckman believes that "It's about moving from being a company that makes a profit and starting to behave sustainably, to being a company that makes a profit because it is sustainable."
Medium enterprises should be more comfortable with the latter approach.