Executive Summary

 

While developing this report, we listened to the stories, followed the funding, and analyzed the conversations that have led to the development and subsequent growth of company sustainability programs. From that research, we recognized that once a company kicks off a sustainability program, the program tends to grow and thrive, even in the midst of an economic recession. “Why?” we wondered. Inquiring further, we realized that, while sustainability programs are initiated in any number of ways, their development and growth hinge on the same key elements as any other business program. As a sustainability program matures within an organization, its business benefits become increasingly apparent, and the business applies more funding and resources to it. We also found that a class of top-performing companies that best exhibits this growth dynamic has emerged in the retail industry.

PROGRAM GROWTH BEGETS FURTHER GROWTH

Implementing systems that promote the expansion of resources, activities, expertise, and benefits of a particular initiative over time can fuel continuous development. In sustainability, we see that companies who kick off continuous development processes are growing, not only the amount and breadth of their sustainability-related activities, but also the business benefits of those activities.

Once an organization overcomes any static friction and forms a sustainability program, success stories within the organization further solidify the business case for sustainability, and executives take note. With proof of concept established and the business case validated, senior management warms up to a broader range of potential activities. Increased confidence and commitment expands the program’s resources and allows the scope of sustainability efforts to broaden.

SUCCESSFUL PROGRAMS FEED THE GROWTH DYNAMIC

We also recognized that the same ingredients are necessary for a sustainability program to be successful as for any other business initiative. In particular, five characteristics allow a retailer to effectively initiate, fuel, and accelerate sustainability programs:

  1. Executive engagement. Top executives control a company’s purse strings and make strategic investment decisions. When they recognize that sustainability is not necessarily a cost center but rather drives strategic growth and innovation, there is potential to free up resources and integrate sustainability priorities into the overall business strategy.

  2. Investment in people and systems. Ultimately it is up to people to develop, lead, and execute any new business process. A team focused on orchestrating sustainability efforts across an organization can, in turn, educate and train employees in other functional roles about the importance of sustainability in their decision making. Similarly, organizations can use investments in information technology such as environmental management systems (EMSs), reporting platforms, decision tools, and financial calculators to integrate sustainability planning broadly.

  3. Measurement and tracking. The business adage "what gets measured gets managed" is as true for sustainability as for any other effort. Setting metrics, developing a baseline, and implementing systems to periodically track and report makes a program accountable its progress. Measurement and tracking also provide the mechanisms necessary for the company to set goals and tell stories about their efforts.

  4. Goal setting. Setting goals is an integral part of a company’s business and sustainability strategies because the process of goal setting gains buy-in and alignment throughout the organization. To achieve their goals, retailers must develop strategies to engage both internal functional teams who make the business decisions and external stakeholders who provide resources, guidance, and services. Also, announcing goals internally and externally demonstrates a company’s commitment to sustainability.

  5. Storytelling. Employees of any business constantly tell stories of all kinds—from the informal anecdote at the water cooler to those conveyed through boardroom meetings and financial reporting. Stories are a crucial way for ideas, practices, and results to be shared across the enterprise, and they are a component of every company’s decision-making process. Showcasing sustainability opportunities and success stories through a variety of channels creates an exciting buzz that promotes broader awareness of activities and shared understanding of how sustainability relates to business objectives.

Properly told, stories can convey the business case for programs or projects that help executives to prioritize sustainability as a key strategy and provide the impetus for additional investment. But storytelling should not be confined to those stories told within the company; creatively discussing company achievements related to sustainability can engage consumers and other stakeholders, driving consumer loyalty, brand enhancement, access to additional expertise and resources, and more.

Each of these strategies can generate new ideas related to, interest in, and investment for sustainability.

A CLASS OF TOP PERFORMERS IS EMERGING

FigureWhile developing this report, we recognized that a variety of practices defined a class of top-performing companies. These top performers are active in a wide range of sustainability-related programs—from facility efficiency to supply chain optimization to stakeholder engagement—and achieve greater-than-average benefits.

We identified top-performing retailers as those companies who are focusing on a wide breadth of sustainability issues. Of all the companies we surveyed, eight retailers indicated that they include more than three-quarters of the facilities, employees, product and supply chains, and stakeholder engagement issues listed below in their sustainability strategies.

In particular, top-performing companies vary from other retailers in the following ways:

Top-performing companies have sustainability teams that are led by a vice president or someone in a higher position and average nine team members in size. The teams’ primary roles are to orchestrate internal efforts, communicate with outside stakeholders, develop strategies, and interact with senior managers. And to do so, they have set up working relationships across the organization, focusing on public and government relations, the supply chain, merchandising, facilities, real estate, and construction.

Top-performing companies focus on a wide variety of facility, product lifecycle, and stakeholder management issues. Facility improvements include waste, energy, green-building design, greenhouse gas emissions, and land use. Product lifecycle improvements focus on transportation, materials, packaging design, and product take-back. With regard to these issues, the sustainability team manages the development of a company’s strategy and goals, with input from across the organization, and typically plans their efforts with a five-year strategic horizon.

As the sustainability team’s scope of responsibilities and breadth of benefits expand, top-performing companies are increasing their team’s budget. They see a vast array of benefits from their activities, including reducing costs, managing risks, staying ahead of regulations, and increasing revenues and profits. Risk management activities—a crucial function for the success of any retail brand—include managing reputational risks, energy and fuel dependencies, human rights risks in the supply chain, and commodity price fluctuations.

To track and report on their performance, top-performing companies measure their energy, material, plastic bag, and fuel usage; waste generation; greenhouse gas emissions; and supplier code of conduct compliance. They communicate through many channels, including their corporate website, intranet site, social media, store signage, the Carbon Disclosure Project (CDP), and a sustainability report, which is assured internally.

Executive Summary