Organizational Governance Organizational Governance

How to Drive Business Model Transformation from Inside Your Company

I attended a half-dozen panels during the first three days at SB ‘15 San Diego, each addressing a specific business function. I listened closely as experts shared case studies on incorporating sustainability into marketing, supply chain, employee engagement, etc. But it wasn’t until this Thursday morning breakout session, on the final day of the conference, that we finally seemed to tie it all together.

By Drew Beal | Published 9 years ago | About a 5 minute read

I attended a half-dozen panels during the first three days at SB ‘15 San Diego, each addressing a specific business function. I listened closely as experts shared case studies on incorporating sustainability into marketing, supply chain, employee engagement, etc. But it wasn’t until this Thursday morning breakout session, on the final day of the conference, that we finally seemed to tie it all together.

Lindsay Clinton of SustainAbility gave us all a warm welcome to the one-hour session on business model transformation. In the past few years, we’ve seen a number of cool, new products and services gain mainstream traction — Uber, Zipcar and Airbnb are a few names that readily come to mind.

Yes, there is lots of innovation happening in small and medium-sized companies. But how do large companies make the shift? That’s the topic we addressed during the session, with real-world examples from both Novelis and Starbucks.

First, Clinton discussed three factors that are influencing business model shifts. (More detailed information can be found in the report being released by SustainAbility by the end of June):

John Gardner, Chief Sustainability Officer of Novelis, shared the story of how the world’s largest aluminum roller and recycler underwent a major strategic shift about five years ago. Megatrends in sustainability were too obvious to ignore - how would the company prepare for the future?

Starting with a set of 50-60 concerns, they ultimately narrowed it down to two main issues:

Aluminum — it’s energy-intensive, releasing lots of carbon emissions in the manufacturing process;
Raw materials — where will they come from in order to grow the business in a sustainable way?

With lots of opportunities to develop low-carbon products and increased demand from its customers, Novelis established a bold target: to increase the use of recycled aluminum from 33 percent to 80 percent by 2020. The environmental and economical impact of achieving that goal will benefit all of those that collaborate in the new “circular economy,” effectively removing 10 million metrics tons of greenhouse gases from supply chain.

Early on, Gardner and his team accepted the fact that they had to divest some profitable products but were confident that they would make up for it in other places.

“We don’t know all of the answers yet, but we know we have to change our business significantly,” Gardner said. “Collaboration is a must, and we know it will pay dividends for everyone involved.”

Jim Hanna of Starbucks then shared a story that started 10 years ago this month, when he was faced with the decision to leave a dream job at Yellowstone National Park to join Starbucks. He was recruited with talk of company values, being told that the company was all about “doing the right thing.” Hanna said yes, and so began his tenure as Director of Environmental Affairs.

At the time, Starbucks was on a massive growth trajectory. The coffee was great, the service was fantastic, but the company was opening new stores at such a pace that the locations became stale. With new coffee startups gaining traction, and fast food competitors entering specialty coffee, Starbucks started to lose its grip on the “third place” feel that made it so popular.

So it was that Hanna’s first big initiative with the company was to develop a “green” building program. Such an agenda requires lots of investment, and lots of change, and Hanna appealed to the company leaders using the same value-laden pitch that recruited him to the company in the first place. The green building program was the right thing to do, and given the scale of Starbucks, the environmental impact would be enormous.

But the idea was met with resistance. What was the potential impact for the business? That’s what the leaders of various business units wanted to know. They didn’t speak the language of sustainability, so the benefits weren’t readily apparent.

A simple change of tone proved to be the secret sauce in getting buy-in for the project.

“Interested in a 10 percent reduction in operating costs?” offered Hanna, enticing the ops managers to ask for more information. “Here’s a green building program!”

To build the business case for sustainability, it’s only appropriate to align innovation metrics with those already used to measure success within your company. This is how sustainability is going to help you hit your business targets.