For businesses, sustainability is not a destination, but a continuous journey. To help companies and managers to understand the topic and why they should be interested in it, PE International uses the concept of the sustainability maturity curve.
It’s a concept that emerged through discussions at our Product Sustainability Round Table back when the idea of Life Cycle Analysis (LCA) was just starting to gain traction. Everyone was excited about the idea of LCA but they weren’t entirely clear on the value of doing it, or how to sell it internally to senior leaders in the company.
To help frame this understanding, we identified four stages on a continuum – what we call the sustainability maturity curve.
The first stage is Compliance. If you feel that your business value is best served by making sure you comply with all the relevant rules and regulations – and that’s a perfectly valid approach in certain circumstances – that allows you to minimise the resources you commit and to concentrate just on the issues that are relevant to you.
If your sustainability strategy is to ensure compliance while keeping an eye to emerging drivers and trends, then maybe conducting an LCA or materiality assessment isn’t going to add significant value to your business.
If you are a B2B firm and don’t currently have any customers asking you for sustainability information about your product, if you’re in a market that doesn’t place a lot of emphasis on the issue and your products don’t have huge environmental footprints, then maybe you don’t need to invest a lot of time or resources into proactively addressing sustainability.
But if your customers are asking you for more information on environmental and social issues, from your carbon emissions and the amount of water you use to the conditions for workers in your factories or those of your suppliers, then you need to act. You have reached the Market-Driven stage, where your main driver is to satisfy requests from your customers.
For example, many companies in the building and construction industry have started to use Environmental Product Declarations, which certify the environmental impacts of goods or operating systems, in order to allow their customers to meet the requirements of the LEED green buildings standard.
Seeing this increased interest from your client base might drive you to become more pro-active in taking sustainability issues into account, collecting data on these topics for other customers before they ask, talking to your peers and trade associations about best practices, even reaching out to your customers to ask how you can help them achieve their sustainability goals. These are the Engaged businesses, such as Tata Steel, which uses Life Cycle Analysis to help customers understand the costs and benefits of using steel in construction. It has also helped the British Constructional Steelwork Association to set up a free online resource to help people in the construction sector learn how to meet government targets on cutting carbon emissions in new buildings to zero by using real world examples.
The final stage in the maturity curve is when companies are striving to Shape the Future. These companies are less concerned about using sustainability to meet their clients’ concerns. Rather, they want to develop products and services that meet the needs of the 21st century – products that have a much lower impact and will therefore help to drive their growth. One of the most high-profile examples of this approach is Unilever, which aims to double the size of its business, whilst reducing its environment footprint and increasing its positive social impact. “Sustainable, equitable growth is the only acceptable business model,” the company says.
The maturity curve framework can be thought provoking and an excellent discussion starter with senior leadership teams in companies. It encourages them to think about where they are now and where they want to be. This turns the conversation to what is needed in order to move along the maturity curve – to progress from Compliance-focused to Market Driven or even to Engaged. Once you know where you are on the curve, we think there are advantages to moving up it but it is very difficult to make the leap from Compliance to Shaping the Future in one go. You need to build the necessary skills and capacity, assign accountabilities, ensure your R&D and innovation teams are creating the products of the future and communicate the benefits and attributes of your products to your customers.
Many companies say that until an issue becomes regulated, they are not going to worry about it but those that are more engaged look to get ahead of trends such as increased demands for transparency and disclosure in relation to issues such as conflict minerals, where the Securities and Exchange Commission has just introduced new rules.
Intel and other consumer electronics companies were active in this area long before the rules came into force and were able to help negotiate the regulations. Once they came into force, companies in other sectors such as healthcare found that they, too, were affected and had to comply. But because they were not pro-active in their approach, they have had to deal with the rules once they were in place rather than being able to help shape them.
The list of regulations or standards companies are asked to comply with grows ever longer – carbon regulations, environmental product declarations, health product declarations, the list goes on – and until it happens people are often in denial about the possible impact. That’s why you have US utilities seeking to minimise the impact of the new EPA rules on emissions. But is that leadership? Maybe US power generators should be looking at the rules to see what opportunities they create to become more sustainable – because that is the direction of travel for the industry – and therefore more competitive.
By contrast, companies such as DuPont, which file details of their carbon emissions through the Carbon Disclosure Project, are using an internal carbon price when they consider the merits of capital investments to ensure that their assets will not become “stranded” by the introduction of tighter regulations or carbon prices – and so that they can tell their investors how they are dealing with these risks.
Then you have companies such as Whirlpool, the white goods maker. It wants to be pro-active and market-driven. It includes water issues and greenhouse gases in its business strategy, but it doesn’t want to shape the future – and that’s ok. Not everyone wants to be out front. There are risks involved. Instead, a lot of organisations are looking to be “first followers”, so they can learn the lessons from those who went first.
Whatever approach you take, it’s not just a question of choosing that and then you’re done. It is an ongoing evaluation. The maturity curve is a framework for people to continually look at the competitive issues they face and the drivers for further action.
Being able to evaluate these issues and act on them are skills and tools you need to have.