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The Complexities of Connecting Executive Bonuses to Sustainable Efforts

The SSC Team February 7, 2019 Tags: , , , , , , , , , , , , , Strategic Sustainability Consulting No comments
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https://hbr.org/2018/11/how-to-tie-executive-compensation-to-sustainability

 When it comes to doing the right thing, wouldn’t it be great if everyone jumped all in just because? Unfortunately, we’ve seen that that is certainly not the way green efforts have worked in the past.

 

While a number of large corporations are making good efforts toward greener practices, the way these efforts should be rewarded when it comes to a traditional bonus or increased compensation is hard to define.

 

In an exploration of how to tie executive compensation to sustainability, Seymour Burchman noted that deciding which elements of sustainable practices for that organization have priority is key and those goals could be linked to a pay incentive.

 

Typically compensation committees would start by tying bonuses or other long-term incentives to goals that relate to compliance and risk management. This tactic might be acceptable for some investors, but it may take too much focus off of the company’s core mission.

 

So, where to begin?

 

Burchman suggests that bonuses should depend heavily on executives’ success in engaging the company in the big strategic picture that correlate with sustainability. If they can motivate their team members to go on the offense when it comes to sustainable efforts, that in turn can help pull sustainability from the edges of the business model into the center.

 

Even though it is clear that not every company can tackle major sustainable initiatives right now, the opportunities to pursue them is growing fast. In a survey by the UN and Accenture, 63% of executives said they believe sustainability will cause major changes in their business over the next five years.

 

Taking these changes into consideration requires a company’s board to engage in a different way of thinking about what will make their company increasingly sustainable while also expanding those efforts when it comes to suppliers and customers.

 

As these goals are established and then connected to executive incentives, it’s vital that directors make sure that to avoid any negative consequences that may come with an attempt to meet said goals. It’s also imperative that directors remain focused on creating a reasonable number of sustainability goals that deliver the most value. Value that can, in term, be used to energize executives and provide benefits for other stakeholders and the broader community.

C&I Report: From Data to Action: Bridging the Gap on Three Best Practices for Sustainable Resource Management

The SSC Team January 15, 2019 Tags: , , , , , , , , , , , , , , Strategic Sustainability Consulting No comments
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For more than 20 years sustainable resource management leader ENGIE Insight has watched as businesses of every size and across every industry have been facing increasing pressure from customers, employees, shareholders, and governmental entities to develop sustainable practices. As businesses evolve in their efforts, they are also developing plans that incorporate sustainability and resource management into their operations. In order to track their efforts, sustainable resource management programs are being implemented more often and are becoming more complex.

ENGIE Insight believes the process has been driven by three forces impacting companies around the globe: digitization, decarbonization, and decentralization.

In an effort to explore how businesses see these global forces influencing the creation, expansion, and complexity of their sustainable resource management plans as well as their greatest opportunity for growth and their biggest challenges ENGIE Insight partnered with Zpryme, a market-research firm, to survey 250 representatives from commercial and industrial businesses and get their perspective. You can check out their findings in From Data to Action: Bridging the Gap on the Three Best Practices for Sustainable Resource Management.

https://www.greenbiz.com/whitepaper/ci-report-data-action

A 6-Minute Guide to Better Sustainability Decisions

The SSC Team December 18, 2018 Tags: , , , , , , , , , , , , , , , , , Strategic Sustainability Consulting No comments
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Enjoy this post from the SSC Archives.

This video from Harvard Business Review introduces a methodology for helping you choose the best decision-support tool for your specific business situation. While the tool is not sustainability-focused, we found it fascinating to think about how to use a decision-tree model like the one presented for thinking about high-stakes decisions like:

  • Accounting for climate change impacts on capital investments.

  • Introducing new "green" products into the marketplace.

  • Rolling out a new telecommuting program.

  • Planning new freight routes for global distribution.

Watch this 6-minute video and let us know if you think this tool helps identify better ways to make high-stakes sustainability decisions?  Leave a comment or join the conversation on Twitter!

State of the Profession 2018

The SSC Team December 11, 2018 Tags: , , , , , , , , , , Strategic Sustainability Consulting No comments
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This year marks the 5th Annual GreenBiz Group’s State of the Profession report, which examines the evolution of the role of the sustainability leader in today’s business world. Each year, GreenBiz conducts an in-depth survey to find out how much sustainability leaders earned, where they worked and what their job entails. A few highlights from this year’s report are a look at whether sustainability programs are sustainable, the rise of the specialists, the implementation of external talent and the gender pay parity.

 

One of our favorite takeaways from this year’s report?

 

That the most important factor impacting whether or not an organization would push their sustainability efforts to the next level was customer pressure. Not top investors or C-Suite demands, but instead the value that people have put into taking care of our planet.

 

For insight into this and so much more, check out the 2018 State of the Profession Report.

Time to Do More Than Talk

The SSC Team November 6, 2018 Tags: , , , , , , , , , , , Strategic Sustainability Consulting No comments
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Have you encountered a CEO or employee who totally believes in the value of sustainable efforts, but also thinks it’s basically someone else’s problem? Unfortunately you aren’t alone. A recent feature in the Harvard Business Review noted that while many organizations these days are happy to talk about sustainable changes, they aren’t really committed to implementing those efforts.

 

Example? While carbon emissions continue to grow, only 1/3 of the 600 largest US Companies have taken steps to put systematic sustainability oversight in place at the board level. So how can we motivate companies to take that next step and actually walk the walk when it comes to making sustainable changes?

 

After interviewing more than 100 people ranging from CEOs to shop floor workers, CB Bhattacharya found that most companies fail to help the members of their team — at all levels — take ownership over these changes. In order to successfully implement sustainable solutions everyone has to believe that this is OUR problem, not someone else’s. So Bhattacharya developed a 3-step model that will help companies move away from just talking and into action.

 

Incubate

In this first phase requires examining your company’s goals and determining how your business impacts the world. In this step, businesses often gain perspective on ways they could make sustainable changes through action, but typically need further help to move their plan into place.

 

Launch

During phase two, the sustainability plan must be presented to stakeholders which helps set the element of ownership into motion. You need to determine what will be the strongest selling point for your team to get committed — focusing on financial benefits or the positive feelings of making a difference. Most likely you will need a bit of both to encourage the feeling that these efforts are for the long-term betterment of your company and the community.

 

Helping members of the team see that their efforts have a real impact can make a huge difference to their willingness to commit to changes.


Entrench

Once people have really gotten on board with the plan and sustainable changes are in place, they will (hopefully) become routine. Making sure to measure the impact of your changes so you can report back will make it clear to everyone what a difference is being made. Being able to really see the changes — say water use reduction — can be highly motivating, instilling pride in the good work and inspiring people to want to do more.

 

 

In Leveraging Corporate Responsibility: The Stakeholder Route to Maximizing Business and Social Value, Bhattacharya and fellow authors Sankar Sen and Daniel Korschun note that the social and environmental responsibility movement doesn’t seem to show any signs of fading away.  As more and more companies commit to making real changes, there are also indirect effects of the efforts — employee retention, customer loyalty, and investor reaction and support.

 

If you can get your team to go all in with you, we know the benefits will be worth the effort.

Creating Sustainable Value (for a Business)

The SSC Team August 23, 2018 Tags: , , , , , , , , Strategic Sustainability Consulting No comments
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Day in and day out, you likely encounter clients who question how sustainability will create value for their business. Let this video by Alexandre Magnin help you respond to their concerns so you can better work with them to incorporate sustainability into their strategy. Magnin’s video focuses on the Sustainable Value Framework (published in 2003 in the journal of the Academy of Management Executive).

https://sustainabilityillustrated.com/en/portfolio/creating-sustainable-value-business/


Why Standards Would Benefit the Green Finance Industry

The SSC Team July 26, 2018 Tags: , , , , , , , , , , , , , , , Strategic Sustainability Consulting No comments
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It’s safe to say we all agree that green efforts in any industry should be applauded and the same is true when it comes to finance. But while a desire for green finance continues to grow worldwide, how can investors and issuers best identify and evaluate risk when the industry has no standards?

It’s clear that the industry is seeing major growth. In 2017 the issuance of labeled green bonds (PDF) jumped to nearly $160 billion and the self-labeled U.S. green bond market more than doubled, powered by a mix of municipalities, states and large corporations. But as these new and innovative financing options are being established, it seems increasingly important that some mandatory standards be created to guide those working in the industry.

Standards in the world of green finance would be beneficial for both investors and for issuers. For investors who are building their green portfolios and need assurances of best practice and reliable ways to monitor the quality of green instruments — regardless of which geographies or industries they invest in — a sense of best practices and who is meeting them would clearly help with decision making. When it comes to issuers, common standards would clarify options in terms of issuance while also ensuring that deals are being appropriately structured and reaching the right investors for each project.

Standardization also serves to enable innovation because it establishes a level playing field. While ING was first to issue a sustainability rating-linked loan, they have since observed that other banks have embraced different set-ups. Five years ago, Climate Bonds Initiative (CBI) and the International Capital Markets Association (ICMA) both set out to establish a voluntary set of guiding principles for participants.

The framework from both organizations was focused on the process that needed to be followed when issuing green bonds: how issuers should describe the allocation of proceeds to investors; how a second opinion should be obtained; and how they should set about reporting in a transparent way.

And as a way to help kick-start the market, these served as helpful principles that could reassure investors and facilitate the uptake of green bonds, without being overly prescriptive about the use of the finance.

But the market has greatly expanded since 2013 and questions related to the use of green bond proceeds — their so-called "content" — have inevitably arisen: Which projects will qualify in specific sectors? Where should the boundaries be set? Where should classifications lean towards green or social bonds?

While CBI and ICMA with the input of other banks and stakeholders have continuously refined their earlier standards, the fact that the principles remain voluntary means that issuers do not need to follow them. On the flip side, if the standards around the industry become too settled, it will be difficult for the market to support the wide range of investor who would like to participate.

Who are these investors? Well the green finance industry has groups coming from varying green backgrounds, including investors with dedicated mandates for green bonds, investors with diversified portfolios that include pockets of green, and investors who find green bonds attractive but don’t have a dedicated mandate in place.

Because of their varying levels of commitment to being green, the investors might have different standards. Those with a dedicated green mandate are going to put potential issuers under much higher scrutiny than others.

And this is where there is a fine line to maintain between what investors want and expect, and what issuers want and need. It’s simply a fact that different industries are moving at different speeds when it comes to sustainability and different industries will face distinct challenges along the way. Within the investor community, there are a range of perceptions about standards and the various investment opportunities available.

Chief executive of the Loan Market Association, Clare Dawson, summed up the need for green finance standards perfectly, "With any new market, establishing a general framework for the product such as the Green Loan Principles (GLPs), which we recently launched, is beneficial as it helps create a common understanding of what people are looking at. We will be seeking to develop the GLP further to accommodate a wider range of loan structures, including revolving credit facilities, to maximize the number of borrowers able to take out green loans."

While issuers and investors have managed admirably with a voluntary patchwork of existing guidelines this far, a fresh set of commonly adopted standards will be the key to allowing green markets to expand. If these standards put the emphasis on process over content, it should create better conditions for green markets to thrive in future. And that’s great news for everyone.

Data or Your Gut? Understanding Your True ROI

The SSC Team May 8, 2018 Tags: , , , Strategic Sustainability Consulting No comments
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When it comes to business there will probably never be an end to the discussion of return on investment talk. But it’s important to remember that while financial returns may be easier to document and demonstrate, there is a lot of "data" that's simply subjective, part of the institutional knowledge, or coming from the expert you've hired that you clearly expect to trust. When all these issues are floating around the world of statistics, here’s why going with your "gut" isn't wrong.

 

In the world of sustainability measuring your ROI cannot be based on stats alone. Sure, if you reduce your energy and water usage it’s great to watch your bill go down. However the bigger savings is the enormous — and less immediately clear — impact that these efforts are having on the environment. What’s more important? Saving $50 or reducing your carbon footprint? Hopefully it’s the second one.

 

Paul Marushka adds to the narrative by examining how a “prove it” mentality challenges the value that environmental health and safety bring to the workforce. Despite our obsession with being able to use data to prove the worth of an initiative, sometimes we simply know the intrinsic value in something. Even if there aren’t stats to back it up. Marushka uses the former CEO of Alcoa as an example of what significant results can be achieved without having data to support the efforts: After he challenged the company to become the world’s safest, Alcoa saw an increase in earnings of 600 percent with sales growing by 15 percent per year during a 5-year period. Seems pretty clear that you can prove to leadership the value of investing in environmental health and safety — even if you don’t have software to examine everything and back you up.

 

Because when it comes to sustainability you have to look past the simple dollar value of your business efforts. There may be other ways to measure ROI. Although these efforts may be less tangible immediately, as a business owner you should start trusting your instincts. In a piece for Inc., Peter Kozodoy brought up a unique concept: how trusting your instincts over hard data could help you make better business decisions. And science is supporting the notion that your intuition is there to help you.

 

In a report published in Psychological Science Joel Pearson, an associate professor of psychology at the University of New South Wales, and his research team found evidence that people can use their intuition to make better, faster, more accurate and more confident decisions. Considering how much we tend to cling to data in the business world, this may seen like an unreliable option, however Pearson’s study showed that surrounding ourselves with more positive, subliminal inputs not only helps us make better choices, but it helps us to trust those choices. Engaging in this concept of picking up on other’s subconscious messages could explain why some folks get "luckier" than others — they always have the uncanny ability to spot exceptional business ideas, or seem to find the best people to work with. Individuals who are more in tune with their intuition over what statistic might tell them may be coming out ahead.

 

As you continue forward in your sustainability efforts, remember that your decisions shouldn’t be based on stats alone. There are a little of elements to consider and numbers don’t always tell the full story. 

4 Tips for Getting Closer to Zero Waste

The SSC Team February 9, 2017 Tags: , , , , , , Strategic Sustainability Consulting No comments

Enjoy this post from the SSC archives.

Zero waste is a lofty goal, but it generally pays off because most of the time less is actually more in sustainability planning. Here are a few helpful hints about waste and recycling to push your waste strategy to zero.

1. Choose “single stream.” By allowing employees to sort recyclable material into a single receptacle, you can expect to see an increase in recycling of up to 50%. Make it easy for employees, and they’re more likely to participate!

2. When crafting a zero-landfill strategy, don’t just focus on recycling. Be sure to include options like: closed loop solutions (reuse), composting, and supply chain management.  Remaining materials that can’t be recycled or reused can be converted to energy through conversion technologies: waste to energy, plasma gasification, and anaerobic digestion.

3. Think about waste conveyance design during new construction. Make sure you consider the following:

  • Internal areas for collection, storage, and separation of materials
  • External space for multiple container sizes and service areas
  • Design for ease of use

4. Cover all of the bases when reviewing recycling, sorting, composting or other waste stream management programs

  • Signage
  • Bin size
  • Bin type
  • Tenant education, key component to gain buy-in maybe have a kick-off meeting and continuous reminders with metrics and goals
  • Space constraints
  • Service area

If your organization wants to get a better handle on its waste, a great first step is conducting a waste audit. We’ve developed a toolkit (webinar, guidance, and templates) all around How to Conduct a Waste Audit. If you find that your team doesn’t have the gumption to sort through all that trash, contact us to arrange a waste audit done by sustainability professionals!

 

Sustainability Consulting Round-Up: Best of the Blog for January 2017

The SSC Team January 31, 2017 Tags: , , Strategic Sustainability Consulting No comments

Each month, we highlight some of our more popular content on the SSC blog!

In case you missed them, here's a round-up of our most popular blog posts from this past month. These are the articles that received the most attention from our online audience. Check them out!

  1. Incorporating 30 Elements of Consumer Value to Maximize Sustainability Returns
  2.  Integrate Total Cost of Ownership with Your LCA to Make Sustainable Choices
  3.  3 Ways to Engage Suppliers on Sustainability
  4.  Is Your Sustainability Strategy Too Complicated?
  5.  Future of the FSC: What Happens When Manufacturers Reject Certifications

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