The triple bottom line is alive and well in this broken economy. Smart corporations are embracing principles of business sustainability and positioning their business units, products and services for new growth. There are early-adopters, a late-majority and laggards in every distribution of companies that choose to
introduce new business strategy and processes to their organizations. In the case of sustainability it is more of a corporate value that needs to be accepted and then injected into the very culture of the corporation for it to become operational and of value. That point is lost on many corporations that simply seek to overlay some sustainability principles onto a few of their facilities or products and wait for positive financial returns. A passive speed-dating approach to corporate sustainability will not work.To be successful a corporation has to proactively adopt sustainability principles, make them their own, align them across business units, and devise clear goals for operational excellence, corporate responsibility, and product strategy. This can only be accomplished through complete senior level buy-in and support. Additionally the business units have to align themselves with the new corporate value for sustainability, develop their own goals and performance indicators toward the new value, and make it relevant to their employees, customers and stakeholders.
Developing, implementing, monitoring and adjusting corporate sustainability for continuous improvement is not an easy task. Corporate sustainability embodies values, vision, goals, actions and improvements. It is as much a process as it is a tangible product or service. To reap the full benefits of sustainability, companies have to be prepared for a cultural change, a process that takes time, and a new way of doing business that is more complex, but ultimately more profitable.
Survival of the Fittest…Darwin Says Sustainability is Evolution
This all sounds reasonable right. And you are going to tell me that the economy is broken and your company is in survival mode. You don’t have the time, resources or support to think about business sustainability. And this sounds very logical to me; except that you are compromising the future success of your corporation with survival tactics, not with sound business strategy. Darwin’s mantra “survival of the fittest” holds true to business, but it is not just solid financials, or cutting costs, or restructuring in tough markets that lead to survivors. In two decades from now the companies that are still alive and thriving will have evolved. On one hand they have superior products and leaders that know the fundamentals of operating a strong business. On another hand they will have transformed to
adopt principles of sustainability that allowed them to evolve their business, products and operations so that they can be fit enough to survive energy price volatility, natural resource and commodity constraints, dynamic and shifting customer preferences for greener products, and new regulatory or market requirements.What I mean by this is that the financial and business landscape has changed and is transforming. Business as usual may sustain your operations for a few months or years; but ultimately government, business and consumers are asking for more. And the “more” that is being requested is not necessarily more money. It is a smarter, better run, less risky and ultimately more profitable business that views the world through the lens of sustainability. That lens views the world more holistically, with people, planet and profit as a more balanced screen than just profit. Twenty and thirty years ago the screen of sustainability was not only foreign to corporations; it was rejected and defied all principles of capitalism and why businesses existed. Today however, the evolution of business sustainability is brining new life to modern corporations that better understand their relationship with the natural, physical and human world; and knowing that for their survival they need to become more sustainable enterprises. That means reducing waste, reducing water and energy consumption, reducing greenhouse gas emissions, designing better products, minimizing their transportation footprint and doing all this while still making a profit.
For those companies that have embraced business sustainability and proactively pursued sustainable business strategies, the following benefits are most frequently cited (1) lower operating costs; (2) a license to operate; (3) enhanced corporate reputation; (4) more efficient and responsible use of commodities and natural resources; (5) more competitively priced products and higher margins; (6) a re-alignment of products that meet customer expectations for price, performance and quality, but also for addressing specific social needs like clean water, more sustainable transport or cleaner energy; (7) product and service differentiation among competitive landscape; (8) attraction of new customers in competitive markets; (9) gain in market share; (10) new revenue toward top-line growth and greater earnings toward profit and bottom-line growth.
Sustainability without Compromise: Crafty Solutions at Kraft Foods
With revenue topping $37 billion in 2007 Kraft Foods is the US's #1 food company and #2 in the world (behind Nestlé). Its North America unit makes the world's largest cheese brand (Kraft), owns the cookie and cracker business (Nabisco) and is the maker of the childhood favorite, Oreos. The company has more than 103,000 employees worldwide. In addition the company operates 187 manufacturing and processing facilities, including 51 in the US, 13 in Canada, and 123 in 44 other countries. Wal-Mart accounts for some 15% of Kraft's sales. Like all companies, Kraft Foods is feeling the economic crunch. But this market leader is not just looking to survive, they are seeking to thrive. So, Kraft has begun to infuse a culture of sustainability throughout its business units, operations and people. To “make sustainability its own”, Kraft has designated Six Sustainability Focus Areas:
1. Transportation & Distribution
2. Agricultural Commodities
3. Packaging
4. Energy
5. Water
6. Waste
Kraft chose to focus on these six priority areas because they felt that is where they could have the greatest impact on their business. And Kraft’s focus on these six areas is paying off. If fact from a baseline year of 2001 Kraft has monitored performance toward key performance indicators (KPIs) and demonstrated continuous improvement. For example, since 2001 Kraft has decreased its global water consumption by 34%, energy use by 25%, carbon dioxide emissions by 30%, and solid waste by 16%.
Operational Excellence - But performance on KPIs is just one indication of how a sustainability strategy is performing. Kraft has also adopted a triple bottom line business sustainability culture and it is beginning to show in their operations, products and performance. For example, in 2007 Kraft Foods adopted anaerobic digester technology at their Lowville, NY facility that processes cheese. The Kraft facility produces whey as a byproduct waste of cheese processing. The waste whey is consumed by bacteria in the anaerobic digester at the Lowville facility and methane gas is produced during the process. The methane gas is then used by Kraft to offset 25-30% of the on-site energy needs. Kraft’s use of anaerobic digester technology not only reduces the amount of waste they have to either proc
ess or transport offsite (whey waste), it produces onsite energy to minimize Kraft’s operational expenditure.Another example at Kraft Foods is their underground storage facility that is built into a reclaimed limestone mine in Springfield, Missouri. The facility is Kraft’s largest refrigerated warehouse and a strategic distribution center for the company. Because the facility is built into a limestone mine that is 30 meters below ground, a constant temperature of 15.5 degrees Celsius is maintained year round. The constant temperature translates into significant energy savings for Kraft Foods. In fact the company estimates that the Springfield warehouse uses 65 percent less energy than comparable above-ground facilities.
Superior Products and Supply Chains - And, as one of the world’s larger food and beverage companies Kraft Foods is using its market size to influence its suppliers while providing the scale necessary to introduce more sustainable products to market. Case in point is Kraft’s commitment to buy coffee beans certified by the Rainforest Alliance, an independent NGO that that works to conserve biodiversity and ensure sustainable livelihoods by transforming land-use practices, business practices and consumer behavior. Kraft Foods is now the world’s biggest buyer of Rainforest Alliance certified coffees. Kraft’s commitment to the Rainforest Alliance and sustainable agriculture practices in coffee communities has not gone unnoticed. In 2007 McDonalds UK decided to switch 100% of their coffee to Kraft Foods Kenco Brand which is Rainforest Alliance certified. The switch by McDonalds happened in part due to changing customer preferences for more sustainable products. Th
e McDonalds decision to purchase Kraft’s coffee opened an entire new account and added market share to Kraft’s coffee line.Sustainable Packaging - Recognizing that the shipment of its products from manufacturing facilities has an environmental impact in the form of greenhouse gas emissions, namely CO2, Kraft has made efforts to minimize the amount of packaging materials it uses for shipping and it has redesigned some product packaging so that shipping containers weigh less. For example, Kraft has redesigned some salad dressing bottles so that they use less material, resulting in less waste, and a 19% decrease in unit weight, and less fuel required to transport the product to market.
Social Responsibility - Kraft recognizes that the packaging of its products carries a large ecologic footprint; that is why Kraft has also partnered with TerraCycle Inc. on a packaging-reclamation program for “unrecyclable” items in which the packaging is “upcycled” into new consumer products available at retail stores. TerraCycle Inc. “upcycles” Kraft products like used Capri-Sun drink pouch containers, reclaims, cleans and uses them in new products like tote bags. The TerraCycle Inc. and Kraft Foods partnership is raising awareness about sustainability; product reclamation, reuse and recycle; and using Kraft’s scale and TerraCycle’s creativity to divert
waste from landfills. Kraft is working with TerraCycle Inc. on creating a broader national network of collection points, often in partnership with local schools. In fact, Kraft donates two cents to participating schools and other groups for every Capri-Sun pouch collected as incentive for working with TerraCycle in this program.The Most Fit are Sustainable
During a financial crisis it is reasonable and necessary to go into “survival mode”. But what does that really mean? For some companies survival mode means getting rid of unnecessary expenditures, underperforming business units and people, and tightening cost controls. These are necessary in many cases. But survival is also about adaptation and transformation. We know the financial markets are changing, we see a shift in consumer behavior, and also a new era of reform in government and business. The adoption of sustainability principles into a corporate culture may be, for the right corporations, a necessary tool for survival. Kraft Foods demonstrates one large corporation’s decision to “get more fit” through the adoption of sustainability principles and values into its corporate culture, and ultimately into its products. And, as demonstrated in Kraft’s operational efficiency at its facilities or in accessing new markets with more sustainable product options, those that are “sustainability fit” can thrive.
Mark C. Coleman
Senior Associate & World Inc. Case Leader, AHC Group, Inc.
Mark@ahcgroup.com
Want to get real about the future of energy, natural resources and capitalism, go to www.ahcgroup.com and www.worldincbook.com to learn more on how leading companies are reinventing the future of business through social response product development and social response capitalism.
No comments:
Post a Comment