Expert Tensie Whelan argues that sustainability as an intrinsic part of corporate DNA drives operational efficiency and innovation, and delivers a range of benefits while also mitigating risk.

Q: How do you make the financial case for sustainability?

Sustainability drives operational efficiency, innovation, employee, customer and supplier engagement, as well as mitigates risk, among other benefits. All these tangible and intangible benefits can be monetized, but generally are not, partially because accounting does not deal well with intangibles and partially because this is all so new, the corporate finance department has not yet caught up.

Q: Is the case conclusive, especially in the absence of better ROI tracking by companies?

The case for cost-based saving through operational efficiencies is very clear and has been demonstrated by companies from Walmart to 3M. Sustainability – meaning balancing environmental, social, and economic goals – has led to cost savings through reductions in waste, energy and water for thousands of companies. The social side is also beginning to demonstrate positive financial impact – Walmart’s increased pay and career path for store employees reversed the downward spiral of negative customer experiences in store, increasing sales.

Q: Is there a penalty for being late? For waiting to see how this plays out and allowing your competitors to go through painful trial and error?

There will be a penalty as this is no longer niche – it is mainstream – and the impacts are no longer in the future – climate change is disrupting supply chains now. Laggards will be penalized, if not through negative impact on their reputation, through higher operational risk and worse margins. For example, coffee farmers are experiencing lower productivity and more disease due to climate change. But changes in sustainability practices can reduce the negative impacts considerably. Companies like Nespresso that are actively engaging with their farmers to help them with these issues will ensure they have a short- and long-term supply of quality coffee.

Q: You’ve used the word “embedded” to describe sustainability in some corporate cultures. Why is that important, and what are the differences between companies where it is embedded and those where it is not?

Traditional CSR and some approaches to sustainability treat the issue as peripheral to core corporate activities. In those cases, the business strategy does not include sustainability issues such as climate change as a disrupter, and thus the impact of sustainability initiatives will be limited. Unilever’s business strategy IS their Sustainable Living Plan and it has driven significant sustainability improvements, but also outperformance by their “brands with purpose,” higher margins than their competitors, and an enviable position as one of the most searched prospective employers on LinkedIn.

Q: How does sustainability drive innovation?

Sustainability is about applying a systems and design thinking lens to traditional processes and products. You provide different design inputs (e.g. reduction of water, improved labor practices) to create products and services that reduce negative impacts and provide a better product for customers. Nike has embedded sustainability into innovation, for example, and that has driven changes in how they produce all their products (reducing environmental impact and costs) as well as led to the creation of a $1 billion plus line of product – FlyKnit sneakers.

Q: What about its importance in attracting talent?

Much of the CEO activism we have seen recently is more for the benefit of employees than customers. Companies know that millennials are looking for companies who share their values and are committed to making the world a better place. As with Unilever, they will attract the best and brightest if they embed purpose and sustainability core to their business.

Q: You’ve spoken of the need to figure out ways to “monetize” sustainability efforts within companies. What does that mean, and why is it important?

Most companies are not tracking the financial benefits of their sustainability commitments, other than cost savings such as energy use reduction. Talent recruitment, engagement and retention, for example, should be tracked in line with a company’s focus on purpose and sustainability. It is possible to monetize the contribution of sustainability to human resource metrics – SAP and PwC have tracked it, for example, and have found significant financial returns. Innovation in processes is another area – companies are innovating new processes in response to sustainability commitments. Domtar, a pulp and paper company, developed a fertilizer from the waste of two plants that had been deposited in landfill previously – a nice circular solution that saved them money and also saved the farmers money as the fertilizer cost was lower.

Q: How has thinking about sustainability been changing?

Companies have been on an evolutionary path, starting with a niche approach, e.g let me try making a green product, to a broader risk management approach, e.g. I need to manage for reputational and operational risk in my supply chain, to a mainstream approach, e.g. this needs to be core to my business, to an innovation approach, e.g. this creates new business opportunities.

Q: How does the calculus differ for B2B companies, vs. those selling to consumers?

Brands in industries such as consumer packaged goods have more pressure on them in terms of reputational risk. But they are passing that down through the supply chain, so B2B companies that are leaders will be able to achieve preferred supplier status and create better relationships with their clients. That said, B2B salespeople are not always well-trained in the sustainability attributes of their products and thus don’t feel comfortable talking about them. That will need to change.

Q: What do you see happening in emerging markets and developing economies?

In my former role as president of the Rainforest Alliance, we worked with companies all over the world and found a wide variety of engagement. There were market leaders like Tata in India and Klabin and Fibria in Brazil that were far more innovative than many US and European companies. And then there were companies in complete denial.

Q: What do you make of the recent letter from BlackRock’s Laurence Fink to CEOs? Do you see it as a watershed moment? Will it change anything?

I agree with Larry Fink that the short-term shareholder focus has done a lot of damage to capitalism, people and the planet and we are facing a reckoning. We need more investors to stand up and require that companies manage for all material stakeholders and ESG issues. And we need to delink executive compensation from delivering on high quarterly margins to the detriment of R&D, employees and the environment.

Q: EcoVadis says companies are shifting focus toward social/labor and business ethics, and going into “maintenance mode” or decreasing investment on the environmental side. Do you agree?

No, I don’t agree. I think companies in the US have been more focused on the environment to date, and they are now playing catch up on the social side, as they should. There are new environmental commitments every day – McDonalds just announced recycling goals in restaurants as well as a commitment to 100 percent recyclable packaging, for example. This is a not an either/or proposition. Companies will need to perform well on material social and environmental metrics. Right now they need to figure out their position on compelling issues that have been ignored for too long, such as employee pay and gender equity.

Q: What else is happening on the social and governance side that’s intriguing to you?

First, we had CEOs publicly state their commitment to reducing greenhouse gas emissions with science-based targets when President Trump pulled the US out of the Paris Accord on climate change. Now CEOs are stepping up on gender issues, immigration, firearms, and so on. As we have a vacuum in governmental leadership on social issues, business is taking the lead. My conversations point to personal commitment by those CEOS, and an acute attention to serving their employees who are asking for executive leadership.

Q: What are you looking for in the next five years? Ten years? What’s going to surprise us?

Just as the march by students in the United States about firearms (which took place on March 25 2018) is unexpectedly changing the dialogue on firearms policy overnight, and as with #metoo and #blacklivesmatter (movements), I think we will see a great reckoning on labor (better pay), climate and water issues in the US and globally in the next ten years. And, hopefully, we will stop looking backward, and, in looking forward, unlock ingenuity and optimism to make transformative changes in how we produce, consume and value products and services.

Blackrock, the largest investor in the world, says it’s time to consider ‘social purpose’ along with profits.

Laurence Fink, CEO of BlackRock, the world’s largest investor, astonished corporate leaders everywhere in January 2018 with a letter telling them it was time they accepted responsibility for more than profits.

Fink called for a “new model of shareholder engagement” in which companies plan and demonstrate how they make positive contributions to society. He put corporate leaders on notice that BlackRock, which has an estimated $6 trillion under management, would be watching and making its own investment decisions based on whether companies demonstrated that they were serving a “social purpose.”

Fink’s letter was a direct repudiation of nearly 50 years of accepted wisdom among business leaders. In 1970, Nobel economist Milton Friedman crystallized what has become a boardroom tenet: “The social responsibility of business is to increase its profits.”

But BlackRock, Fink explained, sees governments “failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining.” Consequently, it is up to businesses to “respond to broader societal challenges,” he wrote.

Sustainability advocates cheered. Fink’s letter “has been more than 100 years in the writing,” said Jack O’Brien, managing partner of an ethical purpose agency that, coincidentally, is named ONE HUNDRED.

The problem, O’Brien said, is that companies exposed by scandals are often the same ones with celebrated CSR programs. “These companies had CSR initiatives sitting on the periphery of corporate leadership,” he said. “Corporates (need) to look at how such ethical purpose can be brought to the center of their business, rather than resting on the sidelines.”

EXCERPTS FROM LARRY FINK’S ANNUAL LETTER TO CEOs

“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

“Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.”

“The time has come for a new model of shareholder engagement …”

“… (You) must also understand the societal impact of your business as well as the ways that broad, structural trends – from slow wage growth to rising automation to climate change – affect your potential for growth.”

“Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?”

The full text of the letter is here

Sustainability is driving innovation in a variety of business areas including product reformulation and process modification.

Researchers say companies that prioritize sustainability are using it to drive innovation in product reformulation, equipment redesign and purchase, process modification, waste recycling and other areas. Notable breakthroughs on the sustainability horizon:

• Imperial College London

  post-grad students have developed a recyclable, biodegradable concrete substitute that uses abundant desert sand with half the carbon footprint in place of increasingly scarce beach and river bed sand. The substance, called Finite, can be used to make glass, computer chips and other products, in addition to concrete.

• Plenty United

   is one of many “indoor farming” startups. The company is growing lettuce, arugula, herbs and other crops in a renovated 51,000-square foot warehouse near San Francisco, using LED lights. The warehouse will yield up to 3 million pounds of leafy greens a year for local tables. Others are also looking at giant warehouses, old factories and repurposed shipping containers, equipping them with sensors that measure temperature and moisture, and fitting them with automated systems that pump in water and nutrients, and use LED strips to provide energy with no need for sunlight or soil. Plenty United employs a sponge-like plastic as a soil substitute and pumps in mineral-infused water.

Indoor farmers claim they can produce 150 times more lettuce per square foot as an outdoor farm, with just 1% of the water consumption. Their operations reuse water, avoid pesticides, and reduce fossil fuels needed to power tractors and deliver over long distances. They tend to be heavy on power consumption because of the LED lights and climate-control systems.

• Conventional farmers

   continue to incorporate technology into their work, experimenting with field sensors, geospatial imagery and analytical processing to boost yields. McKinsey says farmers using geospatial imagery can measure down to “microfields” of 14 square meters or less and better manage irrigation and fertilizer use. The same technology is being used by large commodity buyers to identify the most environmentally suitable crops based on climate, proximity to markets, global crop-yield performance and other factors.

• Graviky Labs

  , an MIT Media Lab spin-off based in Bangalore, India and Singapore, has developed a device that captures particulates emitted through motor vehicle tailpipes and industrial smokestacks to manufacture ink and ink-based art products. Captured soot is processed to remove harmful metals and carcinogens, and to leave behind carbon pigment. “Many black inks are already made using carbon black, which is mostly produced by burning heavy petroleum products. That means Graviky’s process could have a twosided impact on pollution and greenhouse gases,” Fortune magazine says. Gravick Labs hopes to fit its device to bus and taxi fleets in countries such as India, where emissions standards lag behind those of Europe and the United States.

Small businesses can benefit hugely from global trade, but they face many hurdles. 

Image on top: REUTERS/Fabian Bimmer

In 2016, the World Trade Organization released an extensive report on small and medium-sized businesses. Its biggest revelation was how little we know about them.

SMEs, which employ most workers and account for 95% of all firms, are the lifeblood of the world’s economy. Yet they remain understudied, underappreciated and underserved, little understood even by the larger companies that count them as customers and suppliers. What’s more, they have been consistently ignored by negotiators writing international trade rules.

The WTO says SMEs – companies with fewer than 250 employees – have been “largely absent from the broad trade debate.” One result, it says, is that cross-border trade is more difficult and costly for smaller businesses than for larger companies.

Beyond that, the WTO study reads like a confession or self-indictment. “Relatively little is known about SME participation in trade, … their decisions to start exporting, or the benefits they may derive from internationalization,” the report says. “In the WTO context, SMEs have not figured very prominently over the years. A relatively small number of agreements have provisions that refer explicitly to SMEs.”Read the full story on TarekSultan.com

Delivering life saving aid

In 2017, Agility responded to humanitarian crises around the world, notably in Peru and Yemen where flooding and disease took a cruel toll on property and life.

Agility’s humanitarian response to weather catastrophe in Peru

Earlier this year, Agility Peru responded to the Peruvian government’s special request for aid following massive flooding caused by an El Nino weather effect. More than 10 times the usual amount of rainfall hammered the region from December 2016 through April 2017 and caused Peru’s worst floods in 30 years.

Agility is a member of the World Economic Forum’s Logistics Emergency Teams (LET). LETs mobilizes when a country requests aid for humanitarian crises that are the result of a sudden natural disaster that affects more than 500,000 people. Even though Peru did not request international aid, Agility and two other members of LETs collaborated to donate assets and resources to the Peruvian government agencies that were organizing the disaster response operations.

The northwest regions of Peru, including Lambayeque and Piura, were struck hardest by flooding. Catastrophic conditions caused by rising water and mudslides destroyed more than 14,000 homes, 700 miles of road and 200 bridges. More than 150,000 people were left displaced and in need of humanitarian assistance. With the region’s infrastructure crumbling beneath rain and mud, it was a challenge to get supplies to those who needed them.

Collaborating with the local authorities

Agility Peru coordinated with the Peruvian Ministry of Production to move food, water, shelter, medicine, clothing and other necessary supplies to the communities cut off from the economic centre of Lima. Collecting more than 400 tons of aid material from Lima, Agility Peru transported supplies to the government’s central consolidation warehouse where they could be palletised and prepared for shipment from nearby airports. Then the Peruvian military transported the goods to disaster zones for distribution.

Peruvian President Pedro Pablo Kuczynski estimated that repairs to affected regions will cost $9 billion. That figure includes both immediate repairs as well as infrastructure planning to prevent future widespread damage from excessive rainfall. Recovering from a catastrophe that has resulted in more than 100 deaths and hundreds of thousands of displaced people takes time and careful planning; immediate logistical aid helps alleviate the current devastation so a nation can keep looking forward.

“When we received the request to assist with transporting supplies to the communities devastated by flooding, our Peru team was determined to help,” said Thomas Otersen, Chief Executive Officer of Agility Chile/Peru. “Using our freight forwarding, warehousing and supply chain expertise to assist with disaster relief is a natural extension of our day-to-day business and reinforces Agility’s core values. We were drawn to this challenge by a desire to aid our Peruvian neighbors, and we knew it was our responsibility as a locally positioned global provider.”

The container would be used to transport cholera treatment medication — specifically, a lactate solution that combats the effects of dehydration — to affected populations in Yemen. The Agility Dubai ocean freight team worked with four different container vendors to identify an appropriate model. Refrigerated containers (or reefers) are generally constructed with aluminium or steel panelling encasing about four inches of insulation. Inside, a motor runs a generator that supports on-board refrigeration. Agility procured the best reefer it could find and refurbished it for the mission in Yemen.

Testing the container

Before handing over the container, the Agility Dubai team tested its quality during a three-day trial. The container would need to reach and hold a steady temperature below 20 degrees Celsius, even in the steamy Gulf summer. Agility used temperature-monitoring equipment to observe conditions inside the container. Any increase in temperature is reported in real-time updates through this system, which ensures that temperature-sensitive cargo is delivered safely.

The refurbished reefer passed the temperature test, and Agility transported it on a vessel bound for the World Food Programme’s (WFP) Djibouti hub. There, it was handed over to the Logistics Cluster and placed on a WFP-chartered cargo vessel, VoS Apollo, where it was used to keep cholera treatment medication refrigerated while in transport to Yemen.

The reefer will remain in the Port of Aden as permanent onsite cold storage, coordinated by the Logistics Cluster. The Logistics Cluster is currently supporting the humanitarian response of 42 NGOs and UN agencies in Yemen and acknowledges the importance of the reefer in the response with temperature sensitive medication and a challenging climate.

*The UN-led Logistics Cluster provides technical and logistical support to ensure delivery of relief and humanitarian assistance in the aftermath of emergencies and natural disasters. The World Food Programme, the UN’s food agency, is lead agency for the Logistics Cluster.