Circular Economy

How Can a Business Succeed by Giving Back More Than It Takes?

It is becoming increasingly clear that the traditional view of business existing purely to maximise profit for shareholders is not so much wrong as built for another time. Businesses have been slowly moving towards a model that recognises the impact they have on society and the environment, putting increasing amounts of budget and resources towards mitigating that impact. But just minimising the amount of environmental damage a business does is no longer enough.Nor is it sufficient to rely predominantly on CSR to create a good impression. Information is becoming ever more accessible, which means that businesses are subject to greater levels of scrutiny than ever before.

By Mark Reynolds | Published 10 years ago | About a 6 minute read

Nor is it sufficient to rely predominantly on CSR to create a good impression. Information is becoming ever more accessible, which means that businesses are subject to greater levels of scrutiny than ever before.

Businesses are recognising that both climate change and resource scarcity will fundamentally change the way that they have to operate. There is every indication that in the medium to long term businesses will have to face increasingly stringent legislation, public pressure and resource price volatility. Those who do not manage these risks adequately could suffer the same fate as a number of businesses that failed to recognise and embrace the transformative effect of the Internet. If they are too slow to change they may find themselves gradually being squeezed out of existence.

This is one of the major reasons that the concept of “net positive” is gaining traction with sustainability leaders. The precise meaning of the concept is still a matter of debate, but everyone seems to agree that it involves a business giving back more than it takes in some way. This is usually on a single issue related to the major environmental impact of a company’s operations. Companies such as Coca-Cola, PepsiCo, Lego, Rio Tinto, Kingfisher and Ikea are all taking action on issues ranging from energy to water to biodiversity.

The benefit of this approach is that it is a lot more ambitious than an incremental approach, which focuses only on internal targets. Extending the strategy out to impact customers and the supply chain enables engagement with a wider stakeholder community and links the agenda to business growth.

But is it a realistic target? If it is to be successful then there are major challenges that businesses will have to overcome. The easy bit is for businesses to reduce their own impact; most of them are already doing this to a greater or lesser extent. The difficulties are in meaningful measurement and engaging supply chains and customers.

Measurement

In order to do more good than harm, first you need to understand exactly how much harm and good you are doing. This means measurement. Gathering this level of data is no mean feat; the scale of the challenge thus varies from sector to sector, and depends on the boundaries being evaluated. In the ICT sector itself, for example, there has been a focus on the enablement effect that its products and services can have to reduce greenhouse gas emissions. BT has set the goal of helping its customers reduce their carbon emissions by three times the end-to-end impact of its own business, including all activity outside of its own operational boundaries.

Measurement of benefits is still an evolving area and in order to address this the Carbon Trust has worked with BT to develop a methodology to produce a meaningful assessment of how BT’s products and services are enabling its customers to reduce their own emissions. Other companies in the ICT sector such as O2 and KPN are now adopting this methodology and looking to set their own Net Positive goals.

Engagement

Every business has suppliers and every business has customers. Achieving a net-positive goal involves engaging both of these groups to varying extents. This is crucial in terms of both measurement and reduction, because this is where the vast majority of environmental impact happens for most businesses.

Engaging your entire supply chain is not easy, but it is possible to drive change. For example the Carbon Trust and 2 Degrees worked with Tesco to help it achieve its target for reducing emissions from its supply chain by 30 percent by 2020. This involved setting up a suppliers’ buying club, an innovative collaborative procurement scheme that makes it easier for suppliers to invest in specially discounted, energy-efficient lighting from a quality supplier that is accredited by the Carbon Trust, reducing their own emissions as well as Tesco’s supply chain carbon impact.

It is also important to help educate or encourage customers, getting them to make more responsible choices. This can include selecting lower-carbon products, such as a concentrated laundry liquid instead of powder, which is a big focus for companies such as Unilever. Or it could involve engagement at end-of-life, such as recycling of electronic consumer goods such as mobile phones and PCs.

Making It a Success

Net positive is a difficult goal to achieve. Roughly a dozen companies to date have made commitments to becoming net positive on environmental or social issues. However the companies that have embraced the concept are demonstrating leadership and challenging their own organisations to think in new ways to be a force for good.

So why should a business set a net-positive target? To paraphrase the words of John F. Kennedy, about putting a man on the moon: A business should do it not because it is easy, but because it is hard. Or as Kennedy actually said, “because that goal will serve to organize and measure the best of our energies and skills; because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win.”

And the moon comparison is fitting. Not everyone is capable of doing it – to make net positive work you need to be big and you need to have resources to spare. But those leaders that do get there — especially those that get there first — will benefit from the innovation inspired by the process, earn a reputation for sustainability leadership that will last for decades, and know that they have helped to shape the future of business, and the world, for the better.

This article was sponsored by the Carbon Trust.