Reaping rewards: the business case for sustainability
Richard Carter rebuts the commonly held view that sustainability measures are a drain on business
I’m consistently surprised at just how many people believe sustainability will be a cost to their organisation, a burden, or, at best, a distraction to everyday operations. And in times of heightened uncertainty, for example as the UK wrestles with whether and how to leave the European Union, sustainability can get pushed even further down the agenda. Other issues are perceived as more urgent, more relevant to shareholders, or perhaps just easier to address. Short-termism is an established problem, and one that’s often incentivised, too.
At the same time, consumers’ interest in environmental issues is growing at a remarkable rate. They are insisting that businesses respond to public opinion and take responsibility for almost every stage of their products’ lifecycles. We see this in their demands for ethical and transparent supply chains, and their reactions to litter or unrecyclable packaging.
Of course, this is somewhat disingenuous – those same consumers are continuing to buy single-use plastic containers, tolerate unnecessary packaging and choose inefficient cars. They are demanding convenience and low prices, putting greater pressure on manufacturers. Less visibly, most people with a pension have it invested in stocks and shares that must provide immediate returns. In economic terms, consumers and citizens are creating demand for the very things they are frowning upon. Indeed, they are overlooking or delegating the environmental problems facing the world. That may be unwittingly, or perhaps it is just more convenient to do so. The explorer Robert Swan famously said that ‘the greatest threat to our planet is the belief that someone else will save it’. That is now becoming increasingly obvious.
Where does this leave us?
First, it seems to me that many businesses can make relatively small steps and still stand apart from their competitors. How many hotels encourage you to re-use your towels ‘to save the environment’ but then give you single-use water bottles and single-use toiletries, and have the heating on fully? They’re making small changes that are sufficient to be acknowledged by the consumer, but nowhere near enough to address the problems facing the world today. Instead, we need to encourage businesses to think differently and recognise the urgent need for them to change the way they operate. As companies make those bigger changes, their competitors will be forced to take even bigger steps to find a new advantage. This alone will quickly accelerate change.
Second, the world is still blaming someone else. It’s very easy to continuously deflect the problem onto somebody else, whether that’s big business, government, consumers or citizens. Again, this simply isn’t addressing the issues looming over us, and fundamentally it’s not assuaging anyone’s concern at the mess we find ourselves in.
It is abundantly clear that we need to think harder about the effects of climate change and environmental destruction. And we need to think about that over a longer horizon – adapting year by year is nothing more than burying our heads in the sand. Even just a little thought yields enormously beneficial results, commercially and environmentally.
The business case
Given that we can see what’s happening to the world and noting the economic causes and effects, it should be very clear that behaving sustainably is good for business. When asked to think about this, many people concede that perhaps it’s a good marketing strategy to ‘do green things’. But my argument is somewhat more sophisticated – and hopefully considerably more obvious – than that.
There are three elements to the business case for sustainability.
First, behaving sustainably is, by definition, about considering the long-term resilience of the organisation. In other words, that means preserving one’s ability to operate. For the last 147 years Adnams has operated from Southwold, one of the driest parts of the UK (annual rainfall is slightly less than Jerusalem!). As a result, our water use is effectively restricted. Given that water is one of only four ingredients in beer, it is critical that we manage and reduce our consumption to the maximum extent we can. If we did not take this seriously, very soon our ability to produce beer and spirits would be compromised.
Second, behaving sustainably helps to reduce costs. Energy is a very simple example here – not only are electricity, gas and road fuel prices rising, but businesses can also be very wasteful, often without realising. Perhaps the simplest way to reduce energy use is to replace traditional lighting with LEDs – this typically has a payback of less than three years through reduced energy bills alone. For Adnams, the benefits have extended further. Our warehouse has no heating or cooling and relies on the thermal properties of the building to remain cool all year round. Unlike older lighting, LEDs do not emit heat, keeping warehouse temperatures lower and the beer better. The bulbs last a lot longer too, reducing maintenance costs. These all add up to a pronounced effect on our bottom line, which in turn enables us to keep beer prices lower than they would otherwise be.
Last, there is a revenue benefit from the strength of our brand in this area. Consumers are increasingly interested in sustainability, but they are even more motivated to buy from businesses that they trust or that support the causes they believe in. Notwithstanding the risks of marketing one’s sustainability attributes, there is an opportunity for businesses to develop a loyal customer base, and Adnams continues to do this because of its sterling reputation in the region.
Many of these areas overlap, and that is where the business case is richest. For example, it is well understood that considering the inputs, processes and outputs of a business with a view to environmental efficiencies will naturally drive innovation. This leads to a better diversified and more resilient business that has a lower cost base and enjoys revenue growth above its competitors.
Delivering the goods
At Adnams, I work on the sustainability agenda with an environmental scientist, Benedict Orchard. We’ve learned a lot from each other and agree that there are some fundamental principles that any organisation should adopt. First and foremost, a strategy or framework is critical. We look holistically at carbon, water, waste and biodiversity. Beneath that, we have a series of tools to help us take action. These include lifecycle analyses, circularity, environmental gearing and our extensive collaboration programmes. Lastly, there are reporting frameworks to acknowledge, though I think one has to be very careful not to stifle innovation or inadvertently ignore the careful balances sustainability managers have to make every day.
And the results?
Adnams was established in 1872, but there’s evidence of a brewery on the site since 1345. As such, longevity – and therefore sustainability – is important to us, as it should be to all long-term businesses. Every environmental project we’ve implemented has had a very strong financial business case. I’m proud of that, partly because it enables me to afford more, better projects every year, but mostly because it serves to encourage other businesses to take action. If they’re not watching the news and realising just how serious a situation we find ourselves in, perhaps they will at least be motivated to become more sustainable because it will please their shareholders.
Richard Carter is head of finance and sustainability at Adnams Brewery, and a Fellow and non-executive director of IEMA