This is the second in a series of posts on things I learned while leading Corporate Social Responsibility at REI for the past seven years (read part one).
One might think that implementing sustainable business strategy at a major outdoor retailer that is the nation’s largest consumer co-op would have been easy. With committed leadership and highly engaged employees and members, plus a brand that is synonymous with the great outdoors, doing the right thing should come easy. Unfortunately, doing the right thing isn’t a sustainable business strategy; here’s an earlier blog post that explains why. In fact, we faced most of the same challenges other businesses face trying to integrate environmental and social responsibility as part of the company strategy. One of my early mistakes was to trust my business intuition. It turned out to be almost always wrong.
A good example was working on the co-op’s first carbon footprint. I assumed that moving $2B in goods all over the world would make freight the biggest part of the CO2 impact after energy use. When the numbers where crunched it turned out that freight was 10% but employee commuting was substantially bigger at 15% (see REI’s 2011 GHG pie chart here). In retrospect it made sense; after all, we never wrapped a backpack in 4000 pounds of steel and sent it to a store by itself. But that’s exactly what a single-occupancy vehicle (SOV) commute represents for an employee. If I had only followed intuition, we would have missed a big GHG impact and missed an important business issue as well.
Intuition told us that a spike in gas prices would hurt transportation costs, but we were blind to the underlying links between gas price and store employee retention and recruitment. Even if we had some sense that there was a link, we certainly didn’t have a metric that quantified the risk down to the store level. Since commuting GHG was highly correlated to SOV commuting, our carbon footprint gave us a new predictor of future risks and opportunities. It also turned our commuter-reduction efforts into a business risk-management strategy rather than a “nice thing to do” for employees.
For most successful business leaders our intuition has been honed over a career of conventional success (or at least trial and error). Unfortunately our very success in conventional terms is what has created the blind spots that pervade our companies. One key to illuminating those blind spots is timely, rigorous sustainability metrics.
This revelation changed everything about the way we did measurement. In the beginning we collected historical data on energy, waste, etc. so we could publish our annual report. The shift was to build new tools and processes that could collect and present environmental data with the same timing, rigor and accuracy as our financial metrics. We went from looking backward at what had already happened to an ability to look forward. With a tool to forecast and predict what would happen, leaders could plan and test “what if” scenarios and understand how different business decisions would impact financial and sustainability results. With this shift, environmental metrics became an important part of a more holistic business decision process resulting in better decisions and better outcomes.
Part 3
This post first appeared on Kevin Hagen's blog on April 23, 2013.
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VP, Environment, Social & Governance Strategy
Iron Mountain Inc.
Kevin Hagen is Vice President Environment, Social & Governance (ESG) Strategy at Iron Mountain (NYSE: IRM) the global leader in storage and information management services with $4B in sales operating over 1400 facilities in 56 countries.
Published May 20, 2013 5pm EDT / 2pm PDT / 10pm BST / 11pm CEST