Shifting an entire product portfolio to align with an ambitious sustainability strategy is no small feat. Even those considered leaders in corporate sustainability are still refining their approach. This session on day two of SB'17 Copenhagen explored how sustainability scorecards have been developed and used to support product innovation processes for sustainability at several major brands.
In introducing the session, Eric Mugnier of EY France set the scene: Companies are increasingly expected to bring sustainable solutions to market through innovating and preferentially investing in products that are good for life.
Although this is a great strategic end goal, there are many areas of resistance in the traditional structure of a company, typically starting with “but.” Marketing & Sales say, “but our clients don’t specifically ask for sustainable products;” Advertising says, “but promoting sustainable products implies that our other products are not sustainable;” Operations says, “but we’re not ready … we need to change processes, raw materials, skills;” Purchasing says, “but we don’t know if what we buy is sustainable;” and R&D says, “but we don’t know how to – we’re not sustainability experts.”
Wow. So, as companies are trying to shift from a niche market approach (where only one or two products may be ‘sustainable’) to a systemic approach across a whole product range, what are the systems that can be successfully implemented to get through this barrage of potential internal barriers?
What's the latest in impact investing?
Explore the latest tools, guides, platforms and organizations making it easier than ever for investors to put their money where their values are — at New Metrics '19, Nov. 18-20.
Couldn't make it
SB'17 Copenhagen? Check out
from the week!****The four speakers covered a range of approaches to putting product sustainability scorecards in place, but shared some common themes:
1) There is no silver bullet.
Perhaps unsurprisingly, putting together a product sustainability scoring approach for your product portfolio is not a one-size fits-all formula. Nicolas Schnebelen from EY outlined the two main framework approaches:
- Sustainable portfolio mapping, where a company assesses all products in the portfolio and asks for each: Do we have a sustainability risk? If yes, it is labelled a Challenge product. If no, a further question is asked: Is it an outstanding sustainability performer?
- Sustainable product scoring. Individual products can be scored on a number of factors (e.g. raw materials, circularity, energy, benefits during use, affordability).
Although it’s too early to show what its product portfolio approach looks like, Camille Fabre explained the process that Saint Gobain has gone through, using country-specific pilots to test its global methodology, and focusing a lot on the use phase to ensure the longer-term sustainability impacts for product and project are captured – particularly relevant in the buildings sector.
Dirk Voeste explained how at BASF, with over 60,000 products (and 75,000 suppliers, 300,000 customers), the process can’t be overly complex, and needs to be practical in its applicability.
Andrea Brown shared that WBCSD is keen to develop a common framework, showcasing those companies viewed as leaders to inspire and encourage others to follow their path and, ultimately, to raise the bar and deliver more sustainable solutions through building on the inspiration gained from others. However, she cautioned that larger firms may need to plan carefully for differences in application across different markets globally.
2) Implementing product sustainability scorecards is a journey, not a destination.
The speakers talked of a range of different pathways, and a history of background development work internally building up towards their current approach.
Schnebelen explained the wider context behind the development of the approach, from the birth of fair trade and the first ecolabels in the 1990s, to the rise of labels in companies (2000s); to deeper corporate commitments towards a sustainable portfolio (2015 onwards). Looking forward, the focus will continue to develop as firms seek to revisit brand purpose, develop more of a focus on consumers and engage more deeply with the supply chain.
Saint-Gobain started out on a fairly typical pathway with LCA & EPD, developed an EHS checklist in 2008 and launched an Eco Innovation programme for R&D / Marketing teams to develop sustainable products in 2012. Its most recent play was to introduce internal carbon pricing in 2016, and the company is now in the process of developing a product portfolio approach.
Voeste shared how the process of developing BASF’s Product Portfolio Assessment, called the Sustainable Solutions Steering Method, has been key. Specifically, it has been very inclusive, actively involving over 2,000 employees across BASF through workshops and bringing people from across different departments together.
3) A structured approach to product sustainability scoring should be central to business strategy.
Sustainability scoring can (and should) have wider benefits for business strategy and profitability, placing them as centrally important tools for management. Once metrics are established, targets can be set and projects can be compared and contrasted with respect to which have the best opportunity to make the company as a whole more sustainable. Companies can focus on the products with strongest growth rates, but also enhance their overall reputation and retention of staff through prioritising product sustainability. Internally the process can help to identify best practices to be shared. For shareholders, it shows that the company is serious about mitigating risks. For societies it is about building trust.
Fabre explained that the introduction of a product portfolio approach at Saint-Gobain was driven in large part by the need to provide clear data to management to inform investment decisions, as well as supporting the marketing and communications team.
Voeste explained that at BASF, it is no longer a niche approach – the process has been mainstreamed: “We have moved this topic from the Friday afternoon agenda to the Monday morning agenda.” There is a clear appetite to increase the share of products that increase sustainability of the organisation’s operations overall. BASF’s Product Portfolio Assessment approach has now been introduced as a key criterion for all investment decisions (e.g. building a plant, acquiring a company) across the company.
The process of PPA identifies “Accelerator” products (which outgrow their markets, deliver margins above the average, and represent the majority of BASF’s R&D pipeline), as well as “Challenge” products. BASF aims to increase the share of Accelerators to 28 percent by 2020, but admits it is unrealistic to expect to achieve zero “Challenge” products. Instead, those identified in that segment are required to have an action plan signed off by a VP or SVP to lift them out of that category within a set time period.
Brown explained there are many reasons to run a Portfolio Sustainability Assessment (PSA), both carrot and stick, with many companies (Vestas, IKEA, Walmart) now clearly taking a blacklisting approach to products that don’t fit minimum sustainability criteria, for example. But the opportunities are also becoming clearer, ranging from superior performance to enabling your customers to improve their market presence by applying for eco-labels.
Feedback from member companies within the WBCSD has provided a real proof point that better-performing products in terms of sustainability are already shown to be performing better in terms of market growth, as well.
4) No company should operate in isolation.
A partnership approach is critical to application in complex product landscapes. Brown explained how companies in the chemicals sector have been trailblazing in working collaboratively to develop a detailed methodology for their industry over the past four years, developing shared KPIs, strategies on how to align, etc. Likewise, involving external experts (for example, academics) will make the approaches more robust and reassure wider stakeholders on quality.
The impact of product sustainability scoring needs to look both up and downstream, needing to review sustainability impacts from the supply chain and on end use alike. Fabre explained the development process that Saint Gobain has taken – starting with reviewing what its key stakeholders expect (both customers and wider NGOs), and benchmarking what their competitors are doing.
Voeste recognised that “We need to work with our handprint as well as our footprint,” and ask the question: What do our products really do? BASF are now supporting its customers with tailormade sustainability assessments, and it is important to ensure that other stakeholders – from wider society to shareholders – are also seen to benefit from Sustainable Solutions Steering.
An audience member asked for examples of winning strategies to get suppliers to buy into your sustainability scoring programme. For Fabre, the answer lay both in simple use of labels and in sharing the tools to measure the sustainability of the suppliers. Voeste showed how through BASF’s use of Tableau to visualise the data, the sales team can now share product sustainability data directly with the customer, immediately showing them the potential result of their purchasing decisions in their projects.
In wrapping up, Schnebelen outlined the five key success factors for implementing such an approach:
- Convince top management with the right business case,
- Make it robust for experts but simple for users and non-experts (i.e. not greenwashing)
- Adapt to operations / business needs and processes (e.g. review what vocabulary should you use; what processes fit within the decision-making operation within company?)
- Focus on change management within the company
- Extend to the IT sphere where it helps deliver the whole approach value.