A conversation between Jim Fava, Chief Sustainability Strategist at PE INTERNATIONAL, and Bob Willard, business sustainability expert and author.
Willard is one of the leading voices in the sustainability debate. In books such as The Sustainability Advantage and its follow-up, The New Sustainability Advantage, he outlines the business case for taking sustainability seriously. His emphasis on the value creation benefits of sustainability ties in with PE INTERNATIONAL’s own Business Value of Sustainability System™ which quantifies and supports the translation of sustainable business priorities into traditional business metrics such as Return on Investment.
Jim Fava: In the last few years, we have seen a considerable shift in sustainability from being just ‘the right thing to do’ to a business imperative. You seem to have been ahead of the trend here – how did you get involved in sustainability and the idea of value creation?
Bob Willard: What got me into sustainability was an incident with a water treatment plant close to where I was living at time. Ultimately, we were unsuccessful in addressing our concerns, but it led to two realisations. The first was that I had to take more personal responsibility for the wellbeing of my family. The second was that there were a whole bunch of environmental issues about which I was blissfully ignorant.
I thought “we need to help fix this”. I knew business had the resources and the smarts and could help but it needed to be motivated. Business doesn’t do things just for the sake of it. There has to be something in it for them.
That led to The Business Case, my first attempt to articulate the business benefits to companies of having more interest in environmental and social issues. It was my comprehensive paper for my Masters. I took early retirement from IBM to convert it into a book. So that’s how I went from a 34-year career IBM Canada to giving 80-100 talks a year, trying to spread the word that there is a positive impact on profit if a company is more proactive on its sustainability strategies.
Fava: What was the major message that you were trying to convey in your first book? It came out in 2002, which was early on in the sustainability journey.
Willard: I was trying to break through the mindset that many businesses have – that all of these things are over and above running a business, that paying attention to your environmental and social footprint was close to philanthropy, that it was about being a good corporate citizen or was some kind of moral duty to do the right thing.
This is not just the right thing, it’s a heck of a good thing. Why would you not want to make a lot more profit? 50-80% profit in the next three years – that’s a heck of a deal and if as a by-product you can do something useful for the environment, that is kind of cool too. I’m trying to spread the word that this is a win/win/win for the environment, society and business – it’s not a sacrifice, it’s a good thing. But it’s just totally counter-intuitive to most hard-nosed business executives.
Fava: This is not just about growing revenues and cutting costs, but you also have risk management around issues such as climate change, resource efficiency and retaining employees, along with brand enhancement. How do these four buckets of value resonate with different managers within a company?
Willard: For CFOs, the easy ones are the tangibles – concrete things such as revenue increases and expense savings. Risk is a bit of an esoteric art as to how you quantify it, although there are some good ways to do that are also good business practice.
But I think I lowballed the risks – I did not emphasise them as much as I should have. Businesses only care about two things – they want to capitalise on the upside and to avoid risks on the downside. I don’t think we, as sustainability professionals, have not yet played the risk card properly to get the attention of business leaders.
The wake-up call is: if we don’t do this, our competitors will and we will be in trouble, or there will be trouble in the supply chain or customers will start thinking differently about what they care about and therefore about what they buy and who they buy it from.
If I went back, I would recalibrate the risk part of the book to make it more compelling, especially when it comes to climate change, which I thought would take longer to show up. But it’s already here now. I was too conservative in assessing the threat of a price on carbon, higher energy prices etc.
Fava: When Paul Polman, CEO of Unilever, talks about costs of €200 million a year in crop damages, originally you would have put that as a risk, but now it’s a real cost that can be calculated. Companies can see their profits being eaten up by climate change risks. But not all CEOs are persuaded of the need to act. How do you convince CEOs this is a “must-do”?
Willard: It’s taking things that have been marginalised in traditional business as tree-hugger issues and saying that these are hard-nosed business issues – what are you going to do about these things? We are at a stage today where these chickens are coming home to roost. The impacts that we have had on the environment and society are boomeranging back to impact on business. The fact that we are on a finite planet has become harder to ignore. The language we are using to describe the motivations to do more about this needs to be more direct.
Fava: At a meeting with a major chemicals company recently they were talking about the importance of talking the language of the different departments – the CEO, the procurement department, the CFO etc. If you cannot speak their language, you cannot convert these megatrends into the language of the receiver and it becomes extremely difficult to get them to understand. How do you get the CSO to communicate in the language of the CFO?
Willard: You need to “meet them where they are”, talk their language and make these issues relevant to their priorities. If you can’t connect those dots you will be continually marginalised.
Our metrics around social value are just a little pathetic. We need to become significantly more adept at quantifying human capital, social capital and natural capital. We need to treat them as material to the success of the company. If we don’t, it’s not good for society and not good for business. We need to get into the head of the people we are trying to engage with this, using a multi-pronged effort to improve sustainability literacy.
Fava: There are many examples of companies doing great things on a one-off basis, but a frustration that many companies have is how to scale that up across an entire organisation. How do you do that?
Willard: You have to legitimise it as a business issue. People don’t worry about scaling up profits. Maybe this can become the same kind of thing – a hygiene factor -- where it is better to make sure you are doing the right thing or bad things will happen.
It comes back to speaking the right language – if you are talking to HR, then you lead with “people will be more productive” because that’s what HR cares about. You have to lead with the issues that are most relevant to your audience. You need a convergence of expectations so everyone is talking about the same thing. We need to legitimise this as a discussible item in public discourse and make clear that this is important and needs attention that it is not currently receiving.
There are positive signs that investors are starting to pay more attention to this, mostly because it is becoming clear that the companies they invest in are at risk if they don’t. Global sustainability ratings are helping investors do a better job of asking the right questions about the right things.
They are starting to understand that companies paying attention to these things are positioning themselves to be better placed in future, to be a better investment and provide a good rate of return.
Investors are the key to the corporate lock – if investors pay attention to these things then by definition, companies will.
Fava: Bob, thank you very much for your time, insights and efforts in this area. For those who would like more information on your activities we’d strongly encourage them to look at the wealth of resources available on your website.
About PE INTERNATIONAL and Value Creation
PE is similarly doing a lot of work in the area of, translating the language of the CSO to the language of the CFO, as we agree with Willard’s comments above that it is critical to unlocking the full engagement of business. Examples of this effort include:
- Collaborating with Cornerstone Capital to accelerate the integration of environmental, social and governance (ESG) factors into financial investments. Jim Fava, Chief Sustainability Strategist of PE INTERNATIONAL highlighted learnings from the early cloth and single use diaper debates that can be applied today to investment risk mitigation which demand life cycle perspectives.
- This fall PE will be providing a series of ‘Business Value of Sustainability’ Workshops on how to identify, quantify and communicate the Business Value of Sustainability for your company.