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Sustainable for Success

Friday, October 1, 2010 - 08:49

Sustainability strategies can lead to financial benefits as well as reducing pressure on the environment. Cameron Cooper investigates some of the initiatives being implemented by leading organisations.

Road freight giant Linfox is a prime example of an organisation with a significant environmental footprint taking action on business sustainability issues.

As part of a pledge to halve greenhouse gas emissions by 2015 based on 2006-07 levels, the company is embracing improved business practices, environmentally friendly technologies and a new mindset for its people.

The 'greenprint' includes introducing a program called Eco Drive, which teaches its truckies 10 smart driving techniques, including driving in the lane of least resistance, using the appropriate gear and avoiding heavy braking.

Linfox is also examining superior aerodynamic design of vehicles to reduce wind resistance, while route modelling software helps ensure drivers take the most efficient route to their destination.

The results include safer roads, lower fuel consumption and a reduction in carbon emissions, for starters. Linfox's initiative is not an isolated case.

Few companies are pushing as hard on sustainability as British retailer Marks & Spencer (M&S). It is something of a pin-up company for sustainable procurement. M&S estimates it has saved about £50 million ($AUD90 million) over the past year alone on the back of such initiatives.

Most of the savings come from energy efficiency and improved waste-disposal methods. For example, food waste is subject to treatment processes to generate electricity; cuts to packaging and carry bags have reduced inventory levels and environmental impact; and greater waste efficiency has helped lower landfill taxes for the company.

Supply chain becoming crucial

The huge American discount chain Walmart is another example of a company leading in sustainability practice. It is calling on its 100,000-odd suppliers, many of them SMEs, to demonstrate how they are reducing their environmental impact. Failure to do so means they risk being cut. In Australia, Westpac bank has environmental, social and ethical standards for its supply chain of more than 10,000 companies.

The Institute of Public Affairs (IPA), a Melbourne-based free-market thinktank, confirms that farmers are responding to a new era in which supermarkets chains are pressuring agricultural suppliers for more-sustainable produce. Louise Staley, Director of the IPA's food and environment unit, says most back sustainable practices.

"There are always people in the vanguard and also those who are a bit late to the table, but for the majority of commercial farmers these days sustainability is a core way of thinking for their business."

Staley believes market mechanisms are an appropriate driver of sustainable farming.

"Farmers are business people," she says. "If people want food that is certified in some way - it might be Fair Trade or organic or free range - then people will step up and produce that."

Staley cites no-till cropping - whereby crops are grown without ploughing, resulting in lower soil erosion and higher preservation of soil nutrients - as an example of how smarter farming is helping business and environment.

She stresses that profitability remains a priority. "The least profitable farmers are the ones who cannot afford to engage in new technologies that are more sustainable, they can't afford to engage in revegetation, are more likely to overstock their properties. Profitability is absolutely key to sustainable farming practice."

There are clear financial reasons for pursuing sustainability. Green winners, a report from management consultants A.T. Kearney, suggests sustainable organisations outperform industry peers. Its analysis of almost 100 firms on the Dow Jones Sustainability Index and the Goldman Sachs SUSTAIN list of green companies tracked sharemarket performance for six months through November 2008. In 16 of 18 industries, businesses deemed 'sustainability focused' did better than their counterparts.

Jeremy Barker from A.T. Kearney's sustainability team in Sydney, says there is a strong correlation between leading organisations and those that adopt sustainability.

"So whether it is sustainability driving out performance, or whether the best companies just adopt sustainability as a core element of their strategy, it's a sort of chicken-and-egg [scenario], but I think the relationship is quite strong and we see that in Australia as well."

Barker believes Australian companies still lag European counterparts on sustainability. He puts that down in part to the effects of the global financial crisis and stalling around the introduction of an emissions trading scheme.

However, he argues water savings will be one of the next big things on the sustainability agenda.

"Water scarcity in Australia and globally is a big issue and there's a responsibility on the leading companies to have water-reduction plans as part of their programs."

Smarter offices

The built environment has emerged as another important factor in sustainability as companies try to limit their environmental footprint and limit operating costs.

The Crowne Plaza Alice Springs resort, for instance, has installed a multimillion-dollar solar-power plant that will help cut the hotel's energy consumption by 40 to 80 per cent, depending on the season.

Mark Georgiadis, Project Director at property group Colliers International, says many progressive companies want to occupy eco-friendly buildings that minimise water and energy use, take advantage of natural lighting and ventilation, and are located strategically near public transport to cut employees' reliance on cars.

Aside from environmental gains, managers are attracted to budget benefits.

"As part of a sustainable workplace we look both holistically at the actual environment, but also pragmatically at energy usage, which is typically a cost benefit: this includes reduction in power consumption and a reduction in water consumption, as well as other saves such as building materials used and an emphasis in recycling," Georgiadis says.

A number of commercial developments are gaining accreditation under ratings systems, such as Green Star in Australia, that set benchmarks for sustainable site development. Such buildings include Lend Lease headquarters at 30 The Bond in Millers Point, Sydney (incorporating features that lower carbon dioxide emissions), the Melbourne Convention Centre (pioneering the use of chilled floor slabs in conjunction with displacement ventilation), and 39 Hunter Street in Sydney (the first heritage-listed building in Australia to achieve a 6-Star Green Star rating).

Georgiadis notes that from 1 November 2010 the Federal Government will impose mandatory disclosure laws requiring owners of commercial buildings to reveal energy-efficiency information to prospective buyers or lessees. "This will drive the need for property owners to ensure they improve the energy-efficiency of their buildings, as it will be driven by market forces more than anything else."

Such a government initiative comes on the back of greater general scrutiny of sustainability.

Directories business Sensis is one of the flag bearers of sustainability in Australia, (see breakout), and has received a gold rating through the Corporate Responsibility Index (CRI) system.

Jill Riseley, Head of Sustainability at Sensis, says "the bar is always rising" but that reporting tools such as CRI or the global Dow Jones Sustainability Index are important drivers for change.

"Reporting is a foundation of sustainability; it's about transparency, accountability and making sure that you are being honest with consumers and the market about performance."