Building a business case for sustainability

Research indicates that there can really be significant barriers to introducing process innovation into any organisation,especially in business,and when related to sustainability strategies. Management tends to see innovation itself as a fuzzy area. Entrenched mindsets,reluctance to introduce change into a system that already seems to be working and a tendency to conduct short-term strategic planning are some of the main hurdles to new ideas.

The most effective way to overcome such obstacles is to build a strong business case for change and to organise multiple demonstrations and rehearsals until the new concept is internalised. Lets call it the woodpecker approach. But even getting to this stage is difficult for those concerned with embedding sustainability in organisations.

CSM research at IMD shows that in most cases,even progressive firms do not fully develop and roll out the business case for sustainability. Even more importantly,the current shareholder model places maximum emphasis on short-term results. Often there is no incentive for a manager to disrupt the organisation with a new idea whose benefits are not immediately obvious.

Our research also reveals that even in companies with a direct interest in sustainability,such as those in the food and beverage industry,which is heavily dependent on raw material from agriculture (also affected by climate change),there is often a disconnect between the companys long-term interests and the short-term interests of powerful business units such as procurement and marketing,which set their own policies within the company.

So how does a change agent manage to win over the sceptics and move forward with a sustainability agenda? How do you convince a companys management that it can make business sense to go beyond mere compliance? Our research shows that simply advocating change is not enough. Approaching the key stakeholders in a company requires careful analysis and a highly structured approach.

IMD has been working closely with the Sustainable Agriculture Initiative (SAI),a consortium of 22 global food and beverage companies,to create training and development modules to actually alter mindsets,fill knowledge gaps within companies and also build effective internal influence networks.

Change agents need to become familiar with differing types of internal networks in their firms. To institute change,they need to clearly define their objectives and then identify which strategy-makers,which decision-makers and which experts need to buy into the innovation in order to make it happen. And then,in an analogy of the firm as a busy and complex ants nest,which of the firms worker ants need to be on board to do the actual work? Finally,change agents will need to work out what they can ask from each group.

The change process works in phases moving from awareness building to generating interest,organising trials and evaluations and finally internal acceptance. To accomplish this,it is essential to accurately identify internal allies and opponents.

After Copenhagen,it is obvious that companies must still wait some time before a binding agreement on carbon limits becomes available. However,even without a broad regulatory framework,corporations can still be creative on the beyond compliance climate agenda. For example,companies can create conditions that reduce the risk of investments in renewable energy. It can be as simple as building long-term partnerships with renewable energy suppliers and,together,setting up mechanisms for pushing the market for renewable energy from the demand side. Tetra Pak,Novo Nordisk and Nokia Siemens Networks have done just that. Johnson & Johnson has introduced an innovative financing mechanism for carbon-related projects that incentivises managers to get projects off the ground that would otherwise be passed over in favour of other more lucrative options.

Such firms have shown that with flexibility,imagination and a carefully structured approach,it is possible to push the boundaries of incremental innovation in sustainability towards more radical innovation,and to do so without having to break the bank.

The authors are program director and deputy director,respectively,for the Forum for Corporate Sustainability Management at IMD,Switzerland