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overall value proposition for sustainable development that has
been repeatedly established promises a variety of benefits such
as maintaining the social license to operate, building brand
value, enhancing company reputation, building trust among stakeholders
and creating new revenue opportunities. Yet merely embracing
the concept of sustainable development will not deliver its
full value potential. |
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Realizing the value offered by sustainable development requires
a comprehensive approach. Social, environmental and economic issues
cut across organizational boundaries and often interact in complex
ways. Isolated programs or incremental improvements—“eco-efficiency,”
public relations campaigns, corporate philanthropy or publishing
reports—cannot address sustainability and build business value.
Experience demonstrates that a strategy for implementing sustainable
development is a central ingredient in realizing its full potential
for creating business value. But that strategy is more than a schedule
for accomplishing predetermined tasks. Rather, it is a guide for
continuous improvement in a new way of doing business.
Key Elements of an Implementation Strategy
Because every company is unique, there should never be a “cookie
cutter” approach; however, there are similarities in the way
in which many leading companies are achieving results. We call them
“key elements” of success:
• Explicit commitment to sustainable development;
• Engagement of company stakeholders in the transformation;
• Straightforward performance management tools;
• Incentive systems tied to key performance drivers; and
• Closing the information loop for continuous improvement.
Explicit Commitment
A company must develop an explicit statement about sustainable development
because, as the term has become a catch phrase, it can mean many
things to many people. This statement should clearly identify what
it means to the company and establish what the company hopes to
achieve by identifying its strategic objectives for sustainable
development.
An explicit commitment serves several important purposes. First,
it communicates recognition of the need to step out from the “business
as usual” culture. This creates a sense of urgency for change
and begins to mobilize internal constituents. This, in turn, establishes
the basis of commitment for organizational consensus and generates
an agenda for future dialogues. Finally, it helps set performance
expectations among company stakeholders.
Engagement of Stakeholders
Succeeding at sustainable development requires setting a priority
on building broad commitment and consensus among company stakeholders.
A company-specific business case is central to convincing internal
stakeholders—business executives, managers and employees—that
sustainable development is the right thing to do. This business
case must act like the Rosetta Stone, translating the language of
strategic objectives into business terms and proper actions. This
business Rosetta Stone needs to do the following:
• Discuss the prime reasons for a “sustainable development”
strategy (value proposition).
• Create a shared understanding of the operational factors
that create value from sustainable development (value drivers).
• Identify actions needed to create that value and contribute
to overall business success.
However, building this Rosetta Stone only sets the stage for engaging
the company’s internal stakeholders in continuous improvement
dialogues, which should emphasize the need for operational units
to develop their own specific implementation strategies. Subsequently,
they should be used to assure that operational strategies are aligned
with the company’s overall objectives. Internal stakeholder
dialogues should also be tightly linked to the budgeting processes.
Operations see budgets as a vital part of their “day-to-day”
reality. Strategic plans, on the other hand, are often seen as “objectives”
that are not tied into this reality. Using this dialogue process,
companies empower operations to create value, align actions with
strategic objectives and link aspirations to operational realities.
Using sustainable development to create business value also involves
outside parties. Many companies expand their dialogues to include
external stakeholders—investors, customers, suppliers, community
representatives or NGOs. The objective is to assess the relevance
of internal programs, identify emerging concerns, manage performance
expectations and create the process of transparency that builds
trust among all parties.
Performance Management
There are two basic guidelines for creating a sustainable development
performance measurement system:
• Identify the “value drivers” to emphasize the link
between sustainable development and business performance. Leading
performers identify the operational factors that have the greatest
influence on the creation of value—the true value drivers.
• Develop metrics that are straightforward, easy to use and
relevant to strategic objectives. Straightforward performance metrics
avoid technical complexity and the potential backlash against what
looks like the latest management gimmick. Focusing on simplicity
of use means modifying existing performance measures rather than
creating new sets of additional metrics. Additionally, each proposed
metric should be closely evaluated for its relevance and ability
to provide information needed to shape daily actions, evaluate progress
and provide meaningful information to internal and external stakeholders.
Paying for Performance
Successful strategies for sustainable development nearly always
involve increasing everyone’s ownership stake in the program.
There are various ways to do this, but paying for performance seems
to be an almost universal feature of successful programs.
Tying pay to sustainable development performance at organizational
levels creates a true incentive for innovation and accepting the
change to the “business as usual” culture. However, these
incentives must be carefully formulated so that expectations, goals
and stretch goals can be achieved. This means that employees must
understand what change is expected and how they are expected to
affect that change. In short, incentives without empowerment are
meaningless.
Closing the Loop
Using sustainable development to create long-lasting business value
requires continual improvement and communication with stakeholders.
Closing the loop on the implementation process means preparing both
internal and external reports.
Companies need to create reports for
internal stakeholders that honestly portray progress toward strategic
objectives. Using this information, companies can determine whether
their underlying assumptions about the sustainable development value
proposition remain applicable, whether implementation efforts have
succeeded or new efforts for change are needed and additional improvement
is required.
Reporting to external stakeholders, including the public at large,
is equally important. Public reports form the basis for many of
the promised benefits of sustainable development—retaining
the “social license to operate,” creating trust, enhancing
brand value, protecting the company’s reputation and attracting
investors.
Preparing an external report doesn’t need to be a daunting
task: honestly state that the company has embarked on the journey
toward sustainable development, state overall objectives and goals
and promise to progressively report on performance. Still, such
promises cannot be made lightly. The company needs to decide what
information can be reliably presented in an initial report and what
promised information can be included as the reporting process develops.
Companies should seek stakeholder feedback to ensure that targeted
audiences are receiving and understand the messages being sent.
When all is said and done, successfully implementing sustainable
development means fundamentally reshaping company values to achieve
higher business value. Achieving this objective requires a new set
of relationships between corporate departments, business units,
employees and other company stakeholders. It requires broad strategies
that empower managers to focus on implementation actions that create
value. It also requires getting front line employees involved with
the quest for sustainable development and communicating with stakeholders.
Most importantly, the process for implementing sustainable development
needs to focus on creating a set of firm and shared beliefs on how
to continually improve performance so that sustainable development
creates lasting business value.
Chuck Riepenhoff, KMPG partner, leads the company’s
Sustainability Advisory Services practice in the U.S. and is the
U.S. member of KPMG’s Global Sustainability Network Executive
Committee.
Michael Radcliffe is a senior manager in KPMG’s Sustainability
Advisory Services practice, author of Using the Balanced Scorecard
to Develop Metrics for Sustainable Development and co-author of
KPMG’s Beyond the Numbers: How Leading Organizations are Linking
Value with Values to Gain Competitive Advantage.
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