Friday, August 08, 2008

Will Crisis Management drive Sustainability Adoption? (also published on

(This post was also published on

Recent conversations with sustainability execs, including those in the product - centric industries (CPG, discrete mfg) and in technology firms, have centered around adoption of internal sustainability programs (that is: executive sponsorship and enactment of internal initiatives to create a sustainable organization and business model).

A central issue comes up: how to convince executives that sustainability programs are critical to the welfare, brand, and growth of their company?

As in any nascent market or as part of a new management trend, there are always 'thought leader' executives that 'get it' quickly; in this case: they understand the sustainability value proposition for their company, and more importantly, may articulate the specific programs and initiatives that need to be executed to acheive success.

But many execs are viewing sustainablity with a jaundiced eye; it may appear to be 'one more corporate exercise' as one exec told me. And many view sustainability as an additional layer of compliance (more on this in a future post).

This is not to denigrate or judge those executives who don't get it; the incentives for most of these people are ones that you would expect:

- Increase profitability
- Find and develop new product and services lines, or expand to new markets
- Attract and retain the best talent
- And, keep the company out of trouble (i.e. regulatory compliance, product liability mgt, maintain positive press and brand image, etc)

So what may drive sustainability adoption broadly throughout various sectors, beyond that of the 'thought leaders'?

Perhaps the lessons of the environmental regulations wave in the 1970 - 1980's are applicable; when corporations were hit with a multitude of regulations, such as hazardous waste rememdiation, toxics management, and clean air and water requirements.

I worked with corporate environmental officers in the leading process, discrete, and energy companies in that time period, and I was frustrated when I tried to advance proactive strategic environmental risk programs. The value proposition was simply: it pays to stay out of trouble by investing in such a program on an enterprise level.

This sales approach was not extremely successful.

Clients would listen and adopt strategic programs after a crisis hit; a spill or leak of hazardous materials, or evidence of disposal at a Superfund site, for examples. It is hard to invest in the future, especially for events that have not been experienced.

The driving force of adoption of more proactive, strategic environmental risk managment programs was 'crisis management': some companies found themselves in significant risk, in terms of past environmental management practices (or legacies'), with associated regulatory, cost, legal, and negative public image issues as a result. When viewed in this light, proactive strategies (such as sustainability) that encompass processes, people, and products, look like very good investments after all.

When we view sustainability program adoption today, there are certainly those companies who are visible due to their proactive approach (think Walmart), but: we are also drawn to environmental and health crisis's that have occurred; the Mattel issue with it's suppliers was a highly visible example of the need for a corporate sustainability program (or at least a sustainability initiative for the supply chain).

I would advance the idea that in the near term, the vast majority of corporations (i.e. those that are not 'thought leaders', and are in the population within 2 standard deviations of the bell shape curve of their sector) will not adopt sustainability programs unless faced with a crisis; either their own or one from a competitor or well known company. The crisis may not be a major one, but could be big enough to cause negative impacts on brand, customers or employees. They could be: product returns, worker health & safety, past environmental liabilities, losing key talent to competitors, or have a supplier face the same issues.

I don't think this adoption driver will continue on indefinitely, but given the lagging economy and business investment in key sectors (construction, manufacturing), many companies may defer on moving forward with enterprise level programs. When the economy turns around, adoption will probably hit some level of inflection point in the near future (2 years), where sustainability programs will not be a 'nice to have', but will be necessary to compete. But I do not think we are there yet.


bamatthew said...

Good point, Scott. Perhaps the rising cost of energy is the crisis that results in adoption of sustainable practices.

'Sustainability' might not be the term thats used by execs who don't buy into green, but you can call a reduction in energy-based operating expenses anything you like - it just makes business sense. UPS reduced fuel consumption of their fleet by about 15% by just being smart - was that reducing carbon emissions or saving operating costs? Or both?

Maybe sustainability won't get taken on by every exec in the world, but reducing costs through efficiency certainly should be - maybe it's the same thing?

vedula said...

I read your post with lot of interest and I could not agree more with your assessment. I have seen these companies that use marketing budgets for sustainable business and end up no where as they have no corporate vision aligned to sustainable business. In my recent RadioShow on BlogTalkRadio sponsored by Alternative I did discuss the case of Unilever and how they used sustainability principles to ensure they have their business strategies aligned voluntarily.

You can hear my Radio Show recording here-

I welcome your comments or posts on my website or

You can email me on srinivasved at gmail dot com

I enjoyed reading your posts and will be happy to have you as a part of my professional network.

Srinivas Vedula