leader business 2.0 hallmarks of sustainable performance

Stephanie Draper, Lena Staafgård, Sally Uren

acknowledgementsForum for the Future would like to thank its FoundationCorporate Partners for supporting this research throughcontributions to the Business Futures Fund. BP, BT, TUITravel, ICI, Unilever, DTZ, Thames Water, Sainsbury’s,RWE Npower, Vodafone, Royal Mail, Sun Microsystems

Our thanks also to Sean Frisby (research intern), Ben Wood (research intern) and the Forum businessprogramme and partners, on whose work this is based, for all their time, input and advice.

business@forumforthefuture.org.uk

May 2008

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contentexecutive summary 4

introduction 5

why are leader businesses needed? 7

a framework for business leadership on sustainability 8

hallmarks of sustainable performance 9

vision and strategy 10

governance and embedding 12

products and services 14

marketing 16

supply chain 18

external affairs 20

stakeholders 22

environment 24

community 26

reporting 28

becoming a leader business 30

today’s leader… tomorrow’s leader? 34

Forum for the Future - the sustainable development charity - works in partnership with leading organisations in business and the public sector. Our vision is of business and communities thriving in a future that isenvironmentally sustainable and socially just. We believe that a sustainable future can be achieved, that it is theonly way business and communities will prosper, but that we need bold action now to make it happen. We playour part by inspiring and challenging organisations with positive visions of a sustainable future; finding innovative,practical ways to help realise those visions; training leaders to bring about change; and sharing success throughour communications. www.forumforthefuture.org.uk

Registered charity number: 1040519

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executive summaryThere’s a new breed of companies leading the way in doing business more sustainably – we call them leaderbusinesses. While yesterday’s leaders worked hard on understanding reputational, resource and regulatory risksarising from the vast number of issues related to sustainability, today’s leaders see sustainability as a positiveopportunity. It’s a way to build new markets, reach new groups of customers and ensure a long-lastingcompetitive edge.

Today’s leaders don’t create defensive sustainability strategies – their focus is on sustainable growth. To reflectthis shift in attitude and approach, Forum for the Future have updated their Are you a leader business?publication. Called leader business 2.0, this latest version provides a fresh look at a rapidly changing landscape.

This latest version is full of examples of best practice, highlighting some of the many exciting developments incorporate sustainability today. The businesses featured range from big brands such as Nike and Vodafone tosmaller ethical enterprises such as Innocent and Cafédirect; from major retailers and banks to specialistcompanies in the media, manufacturing and travel sectors. Their product portfolios are equally diverse andinclude washing powders, renewable energy solutions, paint, mobile phones, ice creams, holidays and more.

By presenting what today’s leader businesses are doing, we want to challenge all businesses to be braver andbolder in their approach to sustainability.

Our report is structured around Forum for the Future’s framework of sustainable business attributes. It is dividedinto ten areas of general business activity with a number of specific leadership characteristics – what we callhallmarks – for each. There are around sixty of these hallmarks in all, crossing the diverse areas of vision andstrategy, governance and embedding, products and services, marketing, supply chain, external affairs,stakeholders, environment, community and reporting. Today’s leader business are not expected to demonstrateexcellence across all hallmarks, but any claim to a leading position must be based on these two:

• The organisation has a clear and aspirational vision of what it means to be sustainable and understands that sustainability is an essential part of creating value (vision and strategy, hallmark 1)

• The organisation is committed to, and understands the implications of, operating withinenvironmental limits. It has absolute targets for key environmental impacts which are at least aligned to, or go further than, current government policy (environment, hallmark 1)

The full list of hallmarks shows what needs to be achieved, and this report also outlines how companies canapply change management approaches to meet the challenge. The approach needs to be appropriate for eachindividual business but we cover some useful rules of thumb that are relevant for all companies pursuing thesustainability agenda.

It is clear that there has been a lot of progress on many fronts, but is that enough? In the final section of thereport we argue that to achieve a sustainable future, there is still a long way to go. Even if the businesscommunity is changing at a fast pace, there are some formidable challenges ahead, many of which have not yetmade it onto the average boardroom agenda.

This is where leader businesses can pioneer new approaches and encourage others to do their bit to tackleserious global environmental and social challenges. Our examples demonstrate that action on sustainability canhelp create new markets and enhance profitability. There is a compelling case for more businesses to take urgentand radical action, and so to share in the benefits of creating the change needed to secure a sustainable future.

introductionTwo years ago, when Forum for the Future introduced the leader business concept, we expected many of ourbest-practice examples to become standard practice. But we didn’t anticipate just how quickly and deeplysustainability would penetrate into the mainstream. The time most environmentalists have hoped andcampaigned for, when companies actually get it and sustainability is treated as a crucial element of a successfulbusiness strategy, seems finally to be upon us. Green issues are now at the top of the business agenda. They areaspirational and profitable.

In 2007 we saw an explosion of initiatives designed to improve business performance on social, economic andenvironmental issues. One of the most important shifts is that many leading businesses don’t ask what theirsustainability strategy should be in the light of core business, but what their business strategy should be in thelight of sustainability. This shift bodes well – over the next few years we expect to see radical changes in the waycompanies generate profits and move towards sustainable consumption. With sustainability issues shapingbusiness strategy, companies will gain a deeper understanding of how these issues affect their business modelsand future survival. They should also be better placed to communicate ‘value at risk’ and ‘value to gain’ to theinvestment community. The next big step forward will come when the financial institutions really ‘get it’ too, andsustainability becomes integral to company valuation.

But further progress is by no means inevitable. Asking the right questions and introducing new policies won’tautomatically lead to excellent sustainability performance. Leader businesses with strong commitments to, and a deep understanding of sustainability are still struggling with basic issues such as integration, supply chain performance, measurement and metrics. For all the excellent examples of progress in this report there isstill some way to go – the leader business is still the exception rather than the rule. There are plenty ofcompanies that are still going about their business with little or no thought to the social and environmentalchanges that lie ahead.

Through our experience of working in close partnership with over 70 companies, many of whom we wouldclassify as leader businesses, it is clear that the race for leadership is hotting up and that the gap betweendeclared commitment and concrete action is beginning to narrow.

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about this reportThis report is intended to describe what leadership in business and sustainability looks like today. For each of tenareas of business activity we define leadership characteristics – what we call hallmarks – as well as providing theten identified areas of business activity. The majority of our case studies feature large companies but somesmaller, more radical approaches also appear. More case studies are available on our website.

The report is aimed at business people, CSR/sustainability and functional specialists alike. Our hope is that it willencourage organisations to benchmark their performance and provide a framework for developing futurestrategy. Above all, we want to help business get on with delivering a sustainable future.

This report forms part of our series on organisational leadership and change. At the time of publication, currentand forthcoming titles included Leader Business Strategies and Sustainable Wealth Creation. We also havesector-specific leader business reports and hallmarks in development, with a focus on retail, tourism, finance andthe built environment.

These and additional case studies can be found at www.forumforthefuture.org.uk/leader-business

Our publications are complemented by our business network, which provides regular seminars for our partners inthe private sector. Through the network we encourage sharing of best practice, expose businesses to newthinking and develop new approaches designed to deliver more sustainable business practices. Members learnabout various routes to becoming a leader business and develop new ways to overcome challenges.

To find out more about the business network and Forum for the Future partnerships, visit www.forumforthefuture.org.uk/partnerships/private-sector

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why are leader businesses needed?It’s a scary world out thereExponential population growth, shortages of key resources from water to oil, continued eco-system collapse,massive social inequalities in both developed and developing economies - these are just a few of theenvironmental, economic and social challenges we face today.1 Each of these has serious consequences for the way in which companies do business. And combined, they present the need for an urgent shift in business practice.

And then there’s climate change. If IPCC predictions weren’t ominous enough, the collapse of Arctic summer seaice in 2007 suggests that we might be closer to passing the threshold of ‘dangerous’ climate change thanpreviously thought.2

It is time for markets to recognise the magnitude and urgency of the climate crisis. We areconvinced that the transition from a high-carbon to low-carbon economy will be the mostsignificant process in modern economic history – matching the Industrial Revolution in scale,and the technological revolution in pace.

Al Gore and David Blood, Generation Investment.3

Business might choose to ignore many of the environmental and social challenges facing society. But it simplycannot ignore the scientific, economic and political imperative to make a radical and urgent transition to a low-carbon economy.

With every challenge comes an opportunityRadical change doesn’t have to mean reduced competitiveness or profitability. Doing what is necessary to keepour beleaguered planet habitable can also be a real opportunity for business. By understanding the risks andopportunities associated with the sustainability agenda, the leader business is equipping itself to future-proof itsbusiness strategy.

Leader businesses can increase market share by developing new products and services that are bothenvironmentally friendly and socially positive. In so doing they can also strengthen their brands, reduce their riskprofile, get ahead of legislation, and – quite critically in some sectors – attract and keep the best people. Byreaping these benefits, leader business are demonstrating that sustainability can be a route to profitability.

Leading from the front creates changeLeader businesses galvanise wider and more rapid change by demonstrating the art of what is possible. Nobusiness wants to be too far behind the leader of the pack. And the more leaders we see, the greater thepressure on the laggards to move from denial to action.

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a framework for business leadership on sustainabilitySustainability is a messy business: it affects all functions, in all regions, and is notoriously difficult to manage.Even leading companies find it hard to identify the right measures, tools and processes to ensure sustainability isintegrated into business operations consistently.

Forum for the Future has developed a framework to give an overview of what good practice looks like in tenareas of general business activity. Hallmarks of sustainable performance are listed for each area. While these arepresented separately, there will always be some overlap. Indeed, some overlap is necessary, as success in onearea will depend on activities in another. For example, excellence in community affairs depends to a large extenton the quality of local stakeholder engagement, while sustainable products and services need the right kind ofmarketing activities to be successful in the marketplace.

To capture the opportunities that sustainability presents, you need to identify the areas that are most relevant toyour business and push hard on these. But you should also strive to perform well across all of the hallmarks. Ascattergun approach to sustainability, without an over-arching plan, will put your organisation at risk of havingserious gaps and contradictions in its strategy and product/service portfolio. Whilst you may not achieveexcellence across all the hallmarks, any claim to a leading position must be based on these two:

• The organisation has a clear and aspirational vision of what it means to be sustainable, and understands that sustainability is an essential part of creating value (vision and strategy, hallmark1).

• The organisation is committed to, and understands the implications of, operating withinenvironmental limits. It has absolute targets for key environmental impacts which are at least aligned to, or go further than, current government policy (environment, hallmark1).

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The climate challenge

Climate change represents the biggest sustainability challenge of our time and, as such, it has to be tackledhead-on by any business seeking to demonstrate leadership. The current response to climate change, whethercorporate or governmental, does not reflect the scale of the challenge. New scientific findings mean that we haveto consider the possibility of non-linear climate change – and the need for reductions significantly greater thanthose outlined in current governmental targets. Any leader business should recognise this, and not only setradical carbon reduction targets, but also rethink its business strategy and the accompanying products andservices they offer. This leadership position should also be reflected in policiy positions, with business lobbyinggovernment to introduce tough targets to level the playing field and provide a platform for radical action (see Bali Communique case study in External Affairs).

Read more about Forum for the Future’s Climate Challenge www.forumforthefuture.org.uk/partnerships/climate-change

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vision

and strategy

governance and embedding

marketing products supply chain

and services

external affairs

stakeholders environment community

reporting

hallmarks of sustainable performance

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vision and strategy

• The organisation has a clear and aspirational vision of what it means to be sustainable, andunderstands that sustainability is an essential part of creating value.

• The business strategy is set to deliver sustainability as well as profit.

• There is active engagement with the wider sector on sustainability – influencing others toimprove performance and address global challenges, such as poverty and climate change.

• The organisation uses a combination of strategies to deliver sustainable outcomes, such asimproving or replacing technologies or influencing markets.

• Difficult issues are tackled head-on. The risks, as well as the benefits, of taking a bold andleading public position are understood and managed.

• Commitments are reflected in goodexamples of improved performance – in products and services, customerengagement, investor relations andother areas.

Guardian News & Media – a vision to influence opinion

Guardian News & Media (GNM), publisher of The Guardian, The Observer and guardian.co.uk, recently declaredits ambition to lead the media industry in building a sustainable future. Its vision includes a commitment tobecoming environmentally regenerative, with an operational performance that positively affects climate change. It treats sustainability as a business opportunity and sees excellence in sustainability as a way to ensure future profitability.

In contrast to many other media companies, GNM emphasises that its greatest impact comes from editorialopportunities to influence global opinion and understanding of sustainable development. It includes an editorialcommitment in its vision, pledging to lead the field with comprehensive and accurate environmental reporting.

The vision acknowledges some of the big challenges facing GNM if it is to realise its ambitions – including itscurrent reliance on advertising products and services with poor sustainability credentials. This is a good exampleof how a stretching vision really challenges the business.

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TUI – developing strategy for sustainable travel

TUI Travel PLC, Europe’s leading international leisure travel company, deals with over 30 million customers fromover 20 countries and leads its sector on sustainability. Parts of the Group operate in a mainstream marketcharacterised up until recently by a relatively low awareness of sustainability.

Sustainable development is formally embedded into the heart of its strategic planning. The Group ManagementBoard recognises that not paying attention to sustainability issues could pose reputation risks and undermine thequality of destinations through environmental degradation, as well as impact some potential businessopportunities.

The process of setting strategy now includes a fact-base on sustainability, sent to directors across the businessto incorporate into their strategic decision-making. A board level steering committee sets the group-widestrategic direction on sustainability issues, and ‘Sustainable Development Champions’ from across the businesshelp ensure that the action plan is implemented.

In recent years the company’s commitment to sustainable development has been reflected through its actions:TUI Travel PLC is the European launch partner of the Boeing 787 Dreamliner, which is 20% more fuel efficientthan similar-sized aircraft operating today. The business also has a progressive carbon strategy that tackles itsdirect impacts such as fuel efficiency.

Kingfisher – setting strategic sustainability goals

Kingfisher, a leading home improvement group with a global reach, has a clear ambition to fully integratesustainability into business thinking. The company wants to be the one customers choose for sustainable homeimprovements products and services. In 2007 it set about developing a vision and long-term sustainability goalsusing the Five Capitals Model.

A process was designed to take Kingfisher’s executive committee through the strategic implications of future social and environmental trends, confirming that ‘business as usual’ would not equip the company forthese changes. With this in mind Kingfisher developed a set of strategic sustainability goals that enables it to be prepared for, and capitalise on, opportunities presented by the growing market for sustainable productsand services.

Kingfisher has the challenge of coordinating its sustainability activities and maintaining leadership across adiverse group, with operating companies across the globe including B&Q in the UK and China, and Castorama in France, Poland and Italy. Its ‘Steps to Responsible Growth’ management system helps its subsidiaries atdifferent stages clearly understand the way forward and what is expected of them. Kingfisher is now working on the detailed actions that will deliver its vision.

More case studies on the web… Wessex Water, Marks & Spencer, Wal-Mart, GE, Interface.

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InterfaceFLOR – the carpet maker with wall-to-wall sustainability training

InterfaceFLOR in Europe, a leading manufacturer of modular flooring, has created a multi-level trainingprogramme to ensure that all employees understand the company vision (Mission Zero). It is called the ‘FastForward to 2020 Learning Programme‘ and aims to ensure that there is sufficient knowledge surrounding thevision in all areas of the business and supporting progress towards the 2020 goals.

All employees get basic training, with marketing, sales and customer support employees plus managers alsogoing through specialist functional training, focusing on the relation between Mission Zero and their specific jobroles. The senior management levels within the organisation complete the highest level of training, ‘CriticalAnalysis‘, where they learn more about the context of sustainability issues in relation to the vision andimplications of it for the internal organisation.

InterfaceFLOR offers employees with a personal interest in sustainability an opportunity to become ‘SustainabilityAmbassadors’. They are eligible for all three levels of training. As Ambassadors they are inspired to become andstay a driver of the vision within their own circle of influence, either by learning more about the topic or activelyapplying their knowledge in the organisation by engaging or initiating sustainability-related projects on avoluntary basis.

governance and embedding • A system is in place that allows the company to identify and capitalise on sustainability

opportunities. The system allows for experimenting and risk taking and enables theorganisation to learn from its mistakes.

• Ownership and accountability for sustainable performance are spread across keybusiness functions and staff. All staff have personal sustainability targets (althoughthey may not be labelled as such) in relevant areas.

• Robust and transparent governance structures are in place. This may include anexternal panel advising on current and future sustainability issues.

• The organisation recognises that transformation towards sustainability is only possiblethrough deep-rooted cultural change. Systems are in place to enable this change.

• Company values reflect a commitment to sustainable development.

• Staff are sustainability literate, and sustainability ambassadors/champions across the business drive the agenda. Internal and external learning networks are in place to support change happening at all levels.

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BT – moving from risk into opportunity

BT, a global provider of communications solutions and services, is able to clearly demonstrate how, where andwhy sustainability adds value to the company. Its detailed business case draws out five key factors as integral toits strategy and performance: marketplace opportunities, reputation, risk management, employee motivation andcost reduction.

BT is leading the way in moving from addressing sustainability as part of risk management to also viewing it as abusiness opportunity. In addition to its CSR risk register, BT has developed an opportunity map through itssustainable economic growth programme to quantify the market attractiveness and sustainability impact of someof its top sustainability opportunities.

BT also has an external advisory panel thatregularly challenges the company’s thinkingand advises on strategy around sustainabilityand CSR. In addition BT’s board discussesCSR each year.

Internally, BT’s board-level Committee forResponsible and Sustainable Business (CRSB)oversees the company-wide CSR strategy.

EDF Energy – the power to transform a company’s mindset

In 2006 EDF Energy launched its Sustainable Future Project. The purpose was to create a culture of sustainabilitythat would be truly transformational. With this in mind, EDF Energy set out to ensure that sustainabilitymanagement and delivery were firmly embedded in business operations, and linked to employee incentives.

Milestones include a new senior position – ‘Director for Sustainable Future’ – that reports directly to the chiefexecutive. This new post is supported by both an internal panel of experts and an external stakeholder panel.Employees have been invited to debates on climate change, as well as a screening of Al Gore’s An InconvenientTruth. Sustainability ambassadors throughout the company have two hours a week each set aside to championEDF Energy’s sustainability performance.

Stretching targets commits the company to making substantial changes to its operations over the next decade.Performance against these targets is linked directly to the company bonus scheme which applies to everyone,including the chief executive.

What started off as an environmental initiative with a strong focus on climate change now embraces the socialagenda, and the company has developed a set of ambitious social commitments to match its green ambitions.

More case studies on the web… Arup, Whole Foods, Pret A Manger, Carillion.

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products and services • The organisation can point to products or services that deliver on sustainability

commitments and generate profit.

• A strategy is in place to make all products and services sustainable. Approaches mayrange from assessing the impact of a product to rethinking its fundamental purpose.

• Whole-life, closed-loop thinking drives product and service development.

• Products and services target specific challenges (such as climate change, poverty, cleanwater and sanitation) and have a net positive environmental and/or social impact.

• Choice editing – consciously limiting the consumer’s opportunities to selectunsustainable products and services – is built into product stewardship and integratedinto the development process.

• Product and service development is characterised by continuous innovation and testingto improve sustainability performance.

Unilever – measuring product impact, from tea to detergent

Unilever is one of the world’s largest consumer goods corporations, responsible for products as diverse asshampoo and ice cream. The company has led the way on sustainable agriculture for over a decade and in 2006developed Brand Imprint – a tool that combines lifecycle analysis with marketing processes.

Brand Imprint gives an all-round picture of the social, environmental and economic impact of a brand and theinfluences that will shape its growth in the future. As a result of applying the tool to its tea brands PG Tips andLipton, Unilever has pledged to buy all black tea from Rainforest Alliance-certified, sustainable sources by 2015.An industry first, this initiative is projected to improve the livelihoods of around two million people dependent onthe tea industry around the world.

Other brands that have gone through the Brand Imprint process include the Persil and Surf ‘Small & Mighty’concentrated liquid detergent. Changes in product specification have led to lower greenhouse gas emissions,less plastic packaging and a reduced use of petrochemicals. Unilever is rolling out the Brand Imprint process toall its major brands.

More case studies on the web… SC Johnson, Tesco, DIY Kyoto, Solar Century, Toyota.

DTZ – enabling investment in sustainable construction

DTZ, the global property company, and the property group Kenmore’s Sustento Property Investment Fund aimsto provide a unique offering in sustainable property investing for the institutional marketplace. The Fund has setchallenging design targets for the constituent property, which aims to future-proof the investment proposition.Sustento will combine development with refurbishment of existing offices across Europe, while uplifting theenergy efficiency and pioneering ‘green leases’.

The Fund, brought to market in early 2008, has raised the bar for the property fund management sector withexplicit objectives not only to be a ‘green’ fund, but to offer higher returns than comparable non-green buildinginvestments. Sustento’s properties will be several years ahead of current building legislation.

Vodafone – new financialservices for a globalised world of work

In 2007, Vodafone launched M-Pesa, a new mobile payment solution that enablescustomers to make financial transactions using mobile phones. The payment service was launched by Safaricom in Kenya (Vodafone’s associate company), and mostrecently by Roshan in Afghanistan (a networkoperator partner to Vodafone).

M-Pesa is aimed at people who need a fast, convenient and secure way of moving money around. It enables customers to load-up and withdraw funds from their mobile account through local M-Pesa agents and send money to other mobile phone users. The service has been extended to allow bill payments and salary disbursements as well as being used by microfinance institutions to support growth of the micro-credit market. The service in Kenya has seen amazing growth, with nearly 2 million subscribers signing up in the first year of operation.

Following the success of the initial M-Pesa scheme, Vodafone has teamed up with Citigroup to pilot aninternational mobile money-transfer service, testing whether the service will benefit migrant communitiesoverseas who need to send money home. The UN estimates that 191 million migrants send money to their home countries and the World Bank has valued this as being worth $268 billion. In some cases the money being received can make up to a third of the recipient country’s GDP. The service being tested could provide a cost-effective, safer, more secure and transparent means of sending money.

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Dulux – greener paint through the Impact Analyser

Paint is a ubiquitous, high-volume product, with 414 million litres being sold in the UK every year. It is also aproduct that impacts on the environment during production, use and disposal.

In 2008 the market leader, Dulux Trade, owned by ICI and now part of Akzo Nobel, launched a moreenvironmentally friendly product called Ecosure. Branded as a step towards greener paint, this new professionalpaint range represents a genuine improvement in environmental performance for a mainstream product.

Ecosure has reduced levels both of embedded carbon and VOCs (volatile organic compounds) in the paint andthe can that holds it. To achieve these environmental improvements a tool called the Impact Analyser wasapplied, developed by Forum for the Future. This allowed Dulux Trade to compare the performance of Ecosurewith its top-selling standard Trade formulations from the point of extraction up until when the paint was sitting incans and ready to be distributed from the factory.

This new thinking is being incorporated into other aspects of the industry with the aim to achieve furtherimprovements to the paint lifecycle in areas including distribution, brush washing systems and packaging.

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npower business – helping customers go low-carbon

npower business is starting to prepare for the transition to a low-carbon economy by developing new productsand services that encourage its business customers to use less electricity.

However, while the company has been able to enter into strategic partnerships to tackle energy demand withlarge customers such as Sainsbury’s, it has found its SME customers to be less aware of the implications of amove towards a low carbon-economy.

npower business therefore partnered with Forum for the Future to produce a white paper, Making Sense of theLow Carbon Economy, which provides an accessible overview of the scientific, political and economic driversbehind the low-carbon economy, and the potential implications for UK business.

By engaging existing and potential customers with this white paper – and with its annual npower BusinessEnergy Index, which canvasses 200 senior managers and energy buyers about their attitudes to business energyuse, costs and CO2 emissions – npower business hopes to encourage more sustainable behaviour whilesimultaneously creating new markets.

marketing• Marketing activities promote and enable sustainable choices by customers.

• The company’s brands incorporate a promise that includes sustainability, which shouldbe a key component of brand and corporate identity.

• The organisation is able to provide hard facts and verifiable evidence in support ofclaimed product and service sustainability credentials.

• There is an active and honest dialogue with customers on sustainability issues, coupledwith an understanding of how sustainability issues relate to different market segments.

• The relationships between sustainability, brand and reputation have been explicitlyrecognised and, in some cases, quantified.

• New market opportunities are exploited by communicating with the customer to create moresustainable behaviours. New markets are created in both mature and developing economies.

Innocent – good for you and good for the planet

The Innocent smoothies brand represents a sustainable brand in many respects, reflecting the company’s hard work in aligning its identity with green and ethical business practices. The product is marketed as inherently good for you, fresh and healthy. The brand message is about feeling good and being good to yourself and the planet.

Innocent consistently wins awards for its employment practices. The company also engages regularly with thewider community by supporting good causes and staging the annual Fruitstock music festival in London (nowrebranded and expanded beyond the capital).

Innocent runs charitable campaigns through its Innocent Foundation. These have included a fundraiser for the elderly in partnership with the charity Age Concern and a ‘buy one, get one tree’ environmentalawareness campaign.

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Marks & Spencer – promoting Fairtrade, animal welfare andsustainable sourcing

As part of its Plan A sustainability programme, Marks & Spencer is re-thinking the way in which it engages withthe consumer – including product and service development, delivery, choice editing and consumption.

In an effort to minimise environmental impact M&S has committed to buying raw materials from the mostsustainable sources possible, which includes sourcing timber certified by the Forest Stewardship Council andfish approved by the Marine Stewardship Council.

All of the company’s tea and coffee is now Fairtrade certified. It is also looking to promote healthy eating andanimal welfare through ingredient choice editing, allowing for free range eggs only and removing artificial coloursand flavourings. M&S is by no means the only retailer to offer a wide choice of Fairtrade labelled products nor isit alone in choice editing ingredients. It is, however, leading the field in embedding sustainability concerns in allaspects of its business and in taking clear sustainability messages to its customers.

Thames Water – creating a thirst to beat the bottle

Thames Water and the Mayor of London are working together on a behaviour change campaign to encouragecustomers to order tap water in restaurants. Using less bottled water will help tackle climate change by cuttingcarbon emissions associated with its production, storage, transportation and disposal.

The campaign, London On Tap, aims to raise awareness of the impact of bottled water on climate change andthe environment, as well as tap water’s benefits to health and well-being. The campaign encourages customersin bars and restaurants not to feel embarrassed when asking for tap water, and engages with establishments toencourage them to serve tap water as standard. Campaign partners include London Remade, the Crafts Counciland WaterAid, and supporters include Friends of the Earth and London Sustainability Exchange.

More case studies on the web… BSkyB, P&G, Aveda, Tesco.

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supply chain • Sustainability is integrated into supply chain management and is a standard

performance measure alongside other buying criteria, such as cost and service level.

• Buyers demonstrate in-depth knowledge of sustainable development, own keycorporate sustainability targets and drive improved sustainability performancethrough the value chain.

• The organisation collaborates with suppliers to share best practice, improvestandards and stimulate innovation across the whole sector.

• Procurement teams work closely with other departments to find ways to raise thesustainability performance of the supply chain. Procurement professionals influencedesign and development processes through advanced knowledge of sustainabilityoptions in the supply chain.

• Long-term contracts are in place to enable investments along the supply chain toimprove sustainability performance.

• The organisation is using appropriate channels to reach beyond first-tier suppliersand push for performance improvements all the way down to first point of delivery.

John Lewis Partnership – supporting suppliers to deliver the goods

With around 500,000 product lines sourced from over 5,000 different suppliers worldwide, the retailer John LewisPartnership (JLP) has a challenge in ensuring sustainability is integrated throughout its supply chains.

The Partnership’s links with suppliers have always been strong and the ‘Responsible Sourcing Programme’includes continual monitoring of suppliers and provision of advice and information about how to meet andexceed performance criteria for labour standards, worker welfare and, more recently, environmentalmanagement. The Responsible Sourcing Workbook is designed to help suppliers better understand its Code ofPractice and the complex issues of ethical sourcing. In addition to the Workbook, the company provides suppliermanuals, helps suppliers with Sedex registration and runs supplier workshops and conferences.

Waitrose has an excellent track record on its supply chain – leading the industry with its goal to have 100% of itsconventional fruit, vegetables and horticulture supply base LEAF accredited by 2010. It also gained top marks onfish and farming practices in the 2007 National Consumer Council (UK) report on retail sustainability.

JLP’s strong supplier relations help share best practice principles, raising the overall quality throughout thesupply chain and enhancing brand loyalty and trust.

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The Carbon Disclosure Project – acknowledging a bigger footprint

Supply chains are often seen as the weakest link in corporate sustainability programmes. In an effort to improveunderstanding of the impacts and engage suppliers, the Carbon Disclosure Project (CDP) launched an initiativecalled the ‘Supply Chain Leadership Collaboration’ in October 2007. It invited businesses to join as membersand use the CDP process to help measure their total carbon footprint, including that of their suppliers. The CDPis a well-known and respected standard for carbon disclosure. It is backed by some of the world’s largestinstitutional investors, with combined assets of $57 trillion.

Companies such as Wal-Mart, Cadbury, Tesco and Unilever are members of the collaboration and have startedto take steps towards understanding, managing and ultimately reducing their full carbon footprints.

Cafédirect – a better deal for coffee farmers in poor countries

Cafédirect is the UK’s largest Fairtrade hot drinks company. It works in partnership with small-scale growers across the developing world, providing long-term price stability and income security in an unstablecommodity market.

The company operates a ‘Gold Standard’ trading policy that goes beyond basic principles set out underFAIRTRADE Mark standards. The Gold Standard includes a producer partnership programme through whichCafédirect reinvests the majority of its profits into bespoke support programmes. The company actively engageswith grower organisations to support sustainability, offering advice, market information and management trainingto help grow producers’ businesses.

In addition to the Gold Standard trading policy, Cafédirect issues contracts early and so provides collateral that enables pre-financing from financial institutions. This provides farmers with capital to help create long-term stability.

Another characteristic that takes Cafédirectbeyond other Fairtrade organisations is its long-term relationships with its business partners. In over 17 years of trading it has never ended a relationship and has consistentlyprovided support to help its growers to recoverfrom natural disasters.

More case studies on the web… Sainsbury’s, Waitrose Foundation, ICI/Carillion, Herman Miller.

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external affairs • The organisation openly supports progressive regulation and acts within and

beyond its sector to raise standards and performance. It is able to maintain a balance between collaboration and developing a competitive edge without hinderingprogress on sustainability.

• The organisation engages actively with the investment community to demonstratewhere and how sustainability adds value to the business. It clearly acknowledges thatincreased sustainability may affect short-term profits, but is able to demonstrate long-term value added.

• Consistency between publicsustainability messages and behind-the-scenes lobbying can bedemonstrated, reflecting real integrityin the company’s approach.

• Fair taxation policies are recognised as contributing to sustainabilityperformance.

• There is active engagement with tradeassociations, relevant NGOs and otherstakeholders, to identify and addressdifficult issues.

B&Q – a do-it-yourself approach to getting government policy right

B&Q is the UK’s leading home improvement retailer, with a long history of innovation and leadership in the areaof corporate sustainability.

B&Q reflects its commitment to sustainability, not only through its stores and products, but also throughpersistent lobbying for the development of public policy on green issues. Since 2001 B&Q has been lobbying forthe reduction of VAT to 5% on all energy-efficient products and has been encouraging the government to lobbyat EU level for an eventual zero-VAT rate.

Given that almost a third of the UK’s CO2 emissions are produced by households, B&Q is in a strong position tohelp make a significant contribution to reducing emissions. The company has lobbied national government tohelp micro-generation products, such as small-scale wind turbines, win approval from local planning offices. Witharound 3-4 million visitors each week B&Q has a huge opportunity to communicate green and sustainable valuesto its customers and help them reduce their environmental impact.

A founder member of the Forest Stewardship council, B&Q has long guaranteed FSC-certified wood in its gardenfurniture. In early 2008 it extended that pledge to cover its full kitchen range.

EU Corporate Leaders Group on Climate Change – a formidable climate lobby

The Prince of Wales’s EU Corporate Leaders Group on Climate Change is an alliance of high profile businessleaders from major UK and international companies. The group campaigns for the development of new and long-term government policies designed to enable businesses to tackle climate change effectively.

Ahead of the 2007 UN Climate Change Conference in Bali, the Corporate Leaders Group on Climate Changesent a communiqué to world leaders calling for an ambitious, comprehensive and legally binding agreement toreduce greenhouse gas emissions. The group wants decisive action to provide businesses with the certaintyneeded to increase global investment in low-carbon technologies.

The communiqué had the support of 150 global companies from the US, Europe, China and Australia and calledfor UN targets to be guided primarily by science.

The Corporate Leaders Group on Climate Change has a partnership with the UK government aimed atdeveloping policies to reduce CO2 emissions. The group also raises awareness on climate change among Britishbusiness, the public and other national governments.

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Dell and Hewlett Packard – Texas recycling rangers

Dell and Hewlett Packard worked with the US State of Texas to create a mandatory computer recycling bill, based on programmes they were running as part of their wider sustainability schemes. The companiesdemonstrated that mandatory recycling would not be cumbersome or overly costly to business, and helped the state design a programme that requires computer companies to provide free recycling services for their machines.

The bill requires computer manufacturers to provide a "reasonably convenient" recycling plan that requires noadditional payments from consumers. It comes into effect on September 1, 2008, and requires computermanufacturers to submit their recycling plans to the Texas Commission on Environmental Quality. Companiesalso need to file yearly reports on the amount of material recycled.

By requiring every computer company to implement a recycling programme and to bear the costs of doing so,the law aims to use market incentives to stimulate innovative thinking when it comes to recycling the toxicmaterials found in computer products.

More case studies on the web… Co-operative Group, Young’s fisheries.

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stakeholders • The value of stakeholder engagement to the business is clearly understood and evidenced

through senior management engagement. Equally, the organisation ensures that itsstakeholders value and understand the difference they are able to make through engagement.

• Stakeholder views feed into and influence strategic future scanning and long-term planning.The organisation is able to point to actions and real change as a result of this.

• Stakeholder engagement takes place at all levels of corporate activity, ranging from localengagement on single sites through to engagement on global and corporate strategy issues.

• Engagement is characterised by an open and honest dialogue that is encouraged for allbusiness functions and processes.

• The organisation engages beyond traditional stakeholder groups and topics, and understandswhat sustainability means in different regions across the world.

• The organisation uses a clear framework to balance different views and needs, and is able toprioritise issues openly.

Wal-Mart – a retailer in the market for good ideas

The success of Wal-Mart’s sustainability drive, Sustainability 360, depends on active participation of several

stakeholder groups. With a history of denial and non-engagement, Wal-Mart decided a few years ago to open its

doors and work with external groups to transform the company.

Wal-Mart has developed many of its ideas through contact with consultants, suppliers, NGOs and eco-friendly

competitors such as Patagonia and Whole Foods. The success of this approach led the company to form

‘sustainable value networks’ made up of Wal-Mart executives, suppliers, environmental groups and regulators.

Fourteen networks, each with a specific focus – e.g. facilities or alternative fuels – meet regularly to share ideas,

set goals and monitor progress.

The company has also started to engage its customers, beginning with encouraging them to use energy-efficient

light bulbs and concentrated laundry detergent. Staff are being engaged through the introduction of ‘Personal

Sustainability Practices,’ a personal commitment to one or more lifestyle changes which have a positive effect on

themselves and/or society.

The company has set aspirational goals to drive its progress. Those goals are to have zero waste, to be supplied

by 100% renewable energy, and to sell products that sustain resources and the environment.

More case studies on the web… Nike, Novo Nordisk.

Sainsbury’s – the supermarket checking out what pressure groups think

Sainsbury’s Supermarkets is able to demonstrate how it engages with external and internal stakeholders in the UK in a systematic way across a variety of issues. NGOs and campaign groups are asked to contribute to policy and strategy development in relation to key issues such as the sourcing of fish or timber. The retailer also engages external groups to generate future ideas and to better understand expectations of itsown responsibilities.

Internally, Sainsbury’s engages its full workforce in working towards its CR goals, especially in relation to itscommunity work. Employees are encouraged to be active in their local communities, and to nominate and workwith charities to raise funds. The company organises an annual ‘Local Heroes’ award ceremony to celebrate theemployees who have made the most difference.

The Local Heroes winners have been invited tovisit overseas Fairtrade suppliers. In 2008 theyare going to the Winward Islands whereSainsbury’s sources most of its Fairtradebananas. Seeing is believing – and trips likethese are likely to make the staff becomelifelong ambassadors for a sustainableSainsbury’s.

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Vodafone – innovation through conversation

Vodafone, the world’s leading mobile operator, has been engaging with wider stakeholder groups for a number ofyears. In 2007, the company initiated the CR Dialogues programme, designed to go beyond CR reporting andenhance the group’s understanding of stakeholder concerns.

The CR Dialogues focus on the key challenges that the company faces. A typical dialogue would consist of aninitial social report from an independent third party, focus groups with stakeholders and subject matter expertsand on-line discussions. The information gained through these discussions is used in decision-making, creatingmanagement frameworks and developing company policies. By inviting stakeholders to contribute to thestrategic development of CR, Vodafone is able to engage successfully with the wider public and report issueswith stakeholders rather than to stakeholders.

Vodafone recognises the opportunity stakeholder dialogues create by bringing together specialists with in-depth knowledge to discuss community or environmental issues. The company also capitalises onstrengthening its reputation through stakeholder endorsement. The CR dialogues are run both as online debates and through roundtable seminars with invited expert stakeholders.

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environment• The organisation is committed to, and understands the implications of, operating within

environmental limits. It has absolute targets for key environmental impacts that are atleast aligned to, or go further than, current government policy.

• There is a stretching climate change strategy in place that drives performance in allparts of the organisation.

• Systems are in place to identify, understand and manage future environmental risks andopportunities, including climate change. The organisation is able to demonstrate realprogress as a result of these systems and processes.

• The organisation is committed to internalising the business’s environmental costs,currently paid for by society as a whole.

• The environmental commitment of thecompany affects the whole business,including who the organisation goesinto partnership or is otherwise associated with.

• The organisation’s environmentalefforts address the whole product or service lifecycle, including indirect impacts

More case studies on the web… Sainsbury’s, IGD, Interface

Good Energy – putting renewables on the map and into the grid

Good Energy’s vision is of a safe, energy-efficient, low-carbon world, in which everyone – including futuregenerations – has a better quality of life. In 1999, the company was set up to give people the power to combatclimate change by switching their home or business to 100% renewable electricity. It also works to raiseawareness and help customers reduce energy consumption.

Good Energy’s energy is generated solely from sustainable sources guaranteed by an independent auditor. Itsportfolio of products includes a pioneering ‘Home Generation Scheme’ that pays customers 9p for every unit(kWh) of renewable electricity produced (and used) by home installations. The scheme is designed to reward andsupport homeowners who have installed renewable energy generators, such as solar panels and micro turbines.Good Energy is actively trying to help make government targets to generate 40% of the UK’s energy from renewable sources by 2050 a reality.

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Cadbury – the sweet rewards of cutting packaging and emissions

‘Purple Goes Green’ is Cadbury’s environment initiative. The confectionery company made a public commitmentin 2007 to significantly reduce the environmental impact of its operations and transform its manufacturingprocesses as well as its assets.

The first brand in the food-manufacturing sector to declare absolute targets for carbon emissions reduction,Cadbury will halve its net CO2 emissions by 2020. It aims to improve the energy efficiency of its manufacturingprocesses and to buy an increasing proportion of its energy from renewable sources.

The company has also put in place short-term goals for reducing the volume and impact of its packaging andoutlined a ceiling for product-packaging ratio. The company will aim for a 10% reduction in standard packagingand a 25% reduction in seasonal packaging by 2010. It has also committed to making 60% of packagingbiodegradable, 100% of secondary packaging recyclable and to source all paperboard packaging fromsustainable forests by 2010.

In addition to making its own commitments, the company is looking to forge alliances, positively influence otherswithin its value chain to tackle climate change and unite the food-manufacturing sector under a commonsustainability agenda.

Tesco – translating low carbon into low prices

Chief Executive Terry Leahy says he is “determined that Tesco should be a leader in helping to create a low-carbon economy”. He has set some ambitious targets, including to halve emissions from existing stores anddistribution centres worldwide by 2020. Tesco uses an independent organisation – ERM – to measure its directcarbon footprint and it publishes the results. In order to deliver the reductions, it is tackling refrigeration anddistribution and building greener stores. It set up a £100m Sustainable Technology Fund to support large-scalecarbon reduction technologies and has funded a £25m Sustainable Consumption Institute at ManchesterUniversity to think about how supermarkets can be more sustainable.

Tesco is giving priority to empowering all customers – not just the affluent ones – to take action on climatechange. It has pioneered carbon labelling and is now piloting the first 20 products. It has made green productsmore affordable: in 2007 it permanently halved the price of energy efficient light bulbs and doubled the space instore for them, quadrupling sales, and it aims to sell 10 million energy efficient lightbulbs in one year.

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community• The organisation understands that thriving communities and local sustainability

are vital to its licence to operate, and its governance structure places these issuesclose to core strategy.

• The organisation supports the development of sustainable communities throughlong-term partnerships that enable people to determine their own future.

• Community projects are designed through engagement with target groups, toassess their needs, and are aligned to core business and global strategy.

• The business measures the benefits of its community activities and is able toprovide tangible evidence that the communities, its people and the business are allbetter off as a result.

• The community strategy is aligned to big global or local challenges, for example the‘Millennium Development Goals.’ Activities take place throughout the supply chain,encompassing local projects in both developing and developed countries.

• The business has moved beyond traditional philanthropy, using employeeengagement and skills exchange to add value to local communities. All activities arein line with either the core business or company values.

Cadbury – building a fund for farming families

Cadbury has been sourcing cocoa from West Africa since 1908. In marking the 100th year anniversary, the company announced its Cadbury Cocoa Partnership involving the UN Development Programme and several NGOs.

The initiative hopes to ensure the economic, social and environmental sustainability of approximately one millioncocoa farmers around the world. Cadbury is initially investing £1m in 2008 as a seed fund to establish thepartnership, with annual funding levels rising to a steady rate of £5 million by 2010. In total, over the next tenyears, the company plans to invest £44m in this programme.

The centenary partnership will aim to address the root causes of a decline in production, improve the income ofcocoa farmers and enhance the quality of life for communities dependent upon the crop. As part of the initiativeCadbury is investing in research, tools, education and training in helping farmers understand how to get the mostfrom their trees. Research has revealed that cocoa yield is increased with greater biodiversity, such as growingmangoes beneath cocoa trees and inter-cropping with coconut to provide shade. As well as improving cocoaproduction, this increases the financial security of farmers and avoids over-dependence on cocoa.

The management of sustainable cocoa is essential to ensure Cadbury maintains high quality raw ingredients andthat the livelihoods of cocoa farmers are protected for future generations.

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Nike – promoting sport for positive change

Nike and Ashoka, the leading association of social entrepreneurs, teamed up in 2007 to launch a worldwidesearch for projects that aim to use sport and creativity to bring about social change.

Nike’s ‘Sport for a Better World’ competition, organised in partnership with Ashoka’s ‘Changemakers’ initiative,invites entrepreneurs and organisations to enter innovations that use sport to provide a solution to the mostserious problems facing society. The 2008 winners included an initiative to use soccer to reach youth in SouthAfrica and educate them on HIV/AIDS; a Brazilian project that uses SMS mobile phone technology tocommunicate life opportunities for sports, jobs and culture to young people who otherwise lack access to suchinformation; and ‘Sports4Kids’, a US programme that provides structured physical activity and conflict resolutiontraining for low-income children.

The Changemakers competition promotes sportas a driver for social change. It encouragespeople to innovate in the area of social welfareand social justice using sport as a medium.This type of competition is designed not onlyto reward best practice but also to draw outthe most effective initiatives that can be applied in different areas of the world and topromote collaboration in building successfulcommunity projects.

RBS – banking on community education

The Royal Bank of Scotland Group (RBS) appreciates the opportunities arising from aligning its communityefforts with its core business. The group’s dedicated community development banking team runs a highlysuccessful initiative called ‘Face2Face with Finance’, an education programme designed to teach secondary-school children (and the wider community) about financial issues to help them become “more financiallycapable”. Under the scheme, school banks are set up, linked to real branches. The children are trained ascashiers and most open savings accounts, learning vital budgeting skills for the future.

Working with the Community Development Finance Association (CDFA), RBS focuses on four markets– the social economy, social enterprise, small businesses in the 5% of wards that are most deprived, and

community development finance. Notably, several hundred new ATM cashpoints have been installed to offer fee-free cash withdrawals in disadvantaged areas where lower-income residents otherwise sufferdisproportionately from ATM charges.

More case studies on the web…Pret A Manger, Anglo American, Divine Chocolate, Barclays

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reporting• The organisation shows a deep understanding of its material issues, and the system for

prioritising these is robust and transparent.

• Reporting is used to drive performance and provide a structure for measuring and managing all material issues and impacts.

• Sustainability is incorporated into the company’s main report and accounts. A variety of channels (e.g. the internet) are used to reach different stakeholders and meet theirinformation needs, with a particular focus on the investment community.

• Reporting delivers evidence of progress and challenges; the organisation doesn’t shy away from difficult and sensitive issues.

• The company uses assurance wisely – to help challenge its approach and drive performance improvement.

• The organisation engages with thewider business community to developcommon standards for emerging issues, for example embodied carbon and water; and helps developreporting standards (e.g. the GlobalReporting Initiative).

Akzo Nobel – putting sustainability at the heart of financial reporting

Akzo Nobel’s 2008 sustainability report is directed at the investment community – with the specific aim ofdemonstrating how sustainability adds value to business. It is an unusual report in this respect, with all activitiesand policies reported in such a way that the reader understands how they contribute to long-term profitability. Atthe end of the report the company explains how it engages with other stakeholder groups, such as employees,non-government organisations and neighbours.

By using the concept of economic value added (EVA) per unit of ecological footprint, the company is able to align sustainability aims with traditional value levers such as growth and capital and operational efficiency.

The report draws on the GRI global reporting guidelines. The company’s annual report and sustainability reporthave not yet been fully merged but are published together as a pair.

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BT - it’s good to talk sustainability

BT’s sustainability reports make a strong business case for CSR and give a comprehensive account of thecompany’s approach to sustainable development.

The company has been recognised as a leader in the field of sustainability reporting in SustainAbility’s, UNEP’sand Standard & Poor’s review of global reporting in 2006 and through an award from the Association ofChartered Certified Accountants in 2007.

BT’s reports highlight a number of key performance indicators (KPIs), with three-year trend data and a futuretarget for each KPI. BT’s materiality process allows the prioritisation of issues for inclusion in its sustainabilityreports. The top issues are featured in its short printed report, Changing World; Sustained Values. Detailedperformance data and other issues are covered in a comprehensive online database. BT’s Betterworld(sustainability) website includes discussions on topical subjects, for example climate change and educationresources, as well as an online sustainability business game to test the users’ sustainability credentials.

BT’s sustainability reports are produced in accordance with the AA1000 Assurance Standard and the GRI and are independently assured.

Westpac – that bank that holds itself to account

Westpac’s efforts to adopt and communicate strong ethical and environmental policies as a market differentiatorhave earned the bank international recognition as a leader in reporting and progress in this area.

Westpac was the only bank in the world to achieve a 100-point, AAA rating in the Innovest/Carbon DisclosureProject 2007 Climate Disclosure Leadership Index. The bank understands that sustainable business practices arecentral to reducing risk and securing future success. Its ‘service-value chain’ approach – which links employees,customers, the community and outcomes for shareholders – recognises that the chain is only as strong as itsweakest link.

In 2006 the bank developed key performance indicators by which it now monitors and reports on environmental,social and governance issues. The resulting ‘extended performance’ reports are published biannually, analysingprogress against past performance and that of the bank’s peers. A thorough review of the reporting process in2006, informed by extensive stakeholder consultation and conducted in association with the Australian Centre forCorporate Social Responsibility, helped to ensure that Westpac maintains its leadership status when it comes toopenness in communication.

More case studies on the web…Co-operative Group, Novo Nordisk, Kesko, Sedex.

becoming a leader businessThe route to becoming a leader business will depend on your current organisational culture, the externalenvironment and your starting point. Some companies use a big announcement to drive change, while othersprefer to wait until they have a set of sustainable products ready to launch. Our experience shows that there aresome useful steps that will help you take a lead on sustainability and become a leader business.

It’s about changeOne factor is common to all success – an acknowledgement that sustainable business is not business as usual.It’s about change, and in some cases, quite radical change.

There are lots of different ways to approach the complexity of change. There is no straightforward route map. Butthere are ways to increase your chances of successfully changing your business4. The following steps will helpyou lay the foundations for achieving excellence across the hallmarks of sustainable performance.

Create a positive visionThe first challenge is knowing where you need to get to. How will social and environmental issues affect yourorganisation, now and in the future? What are the most important issues to tackle, and where are the boundariesof your company’s own responsibility? A prerequisite to becoming a leader business is to know what your goal isand to have a vision.

When developing a vision, there are two important things to consider. First, a sustainable approach has to takeaccount of environmental limits5 and social needs, such as equity and justice. Leader businesses usually shapetheir ambitions using a solid sustainability framework such as the Five Capitals Model or The Natural StepFramework.6 This enables them to get under the skin of their key sustainability challenges, and identify theopportunities. Kingfisher, for example, used the Five Capitals Model to ensure that all aspects of sustainabilitywere covered in its vision (see page 11). Similarly, ICI Paints used a streamlined lifecycle analysis based on TheNatural Step Framework (see page 15) throughout the development of the new Dulux Ecosure paint.

Second, a good vision should be long-term. Careful analysis of possible future trends is essential if companiesare to understand the radical changes needed to achieve sustainability. In developing its long-term vision TheGuardian newspaper, for example, focused thinking on what the future global media industry would look like andwhat that would mean for its business strategy (see page 10).

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Many leader businesses publish a statement of ambition as part oftheir sustainability journey. The best of these statements are basedon a clear vision – be that a broad outcome or a detailed set oftargets. Setting out ambitions in this way is important. It not onlymakes a company’s future direction clear, but also means that thebusiness can be held to account for its sustainability performance.

Take it to the topWe all know that in most organisations you need top-levelendorsement to make things happen. For many of the companiesfeatured in our case studies, that endorsement goes way beyond anencouraging statement in the CSR report and reaches all the way tochief executive level. Marks & Spencer’s Plan A, for example, is marshalled by CEO Stuart Rose (see page 17).He talks about it, supports it and makes it business as usual. By doing so he gives others in the businesspermission to take sustainability seriously.

Top managers in leader businesses see sustainability as a serious business issue and part of the boardroomagenda. They recognise that many ways of making money today won’t be profitable tomorrow, and thatsustainability concerns will shape their future operating context.

Identify strategic opportunitiesThe drive from leaders at the top of the business helps to create the vision. Critically this must then be translatedinto core strategy. Strategic opportunities for leader businesses come from a variety of sources. Our researchsuggests that sustainability can provide a competitive edge through new or improved technologies, throughcreating markets and customer demand for more sustainable products and services, and by changing theexternal operating context to reward sustainability performance. These are summarised overleaf and explored in detail in our report Leader Business Strategies.7

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Leaders of the future need to look, think and act:

Further – taking the long-term view Deeper – by being sensitive to thecomplexity of the issues Wider – through an approach that isinclusive of many perspectives, andwith an extended sense oforganisational boundaries

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TECHNOLOGIES

The TECHNOLOGIES that underpin

a business’s offer

• Improve currentproduction methods to

reduce costs and impacts Interface has reduced waste

and emissions drastically overthe past ten years, saving

$370m in the process

• Use closed-loop systemsin production and beyond

A good example is the Zero Emission Enterpriseinvolving ICI, Carillion and

Forum for the Future.

• Improve design ofproducts as customer

needs evolveThe DTZ and Kenmore

Sustento Investment Fund is built on a new set of

criteria, reflecting future risksand opportunities.

• Create a radical new technology

Phillips Edore lighting uses 50% less energy than its competitors.

MARKETS

The MARKETS, current andnew, where businesses

make their offer

• Improve transparency toprotect brand

Nike’s response to criticismabout labour standards

includes reporting on all thefactories it uses.

• Create and grow newmarkets at the bottom of

the pyramidVodafone is developing newmobile phone based services

for the Kenyan market.

• Grow size andsophistication of demand in

mature marketsMarks & Spencer’s ‘Look

Behind the Label’ campaigncontributed to its sales

recovery.

• Sell services, not products

Novo Nordisk is a leader indiabetes care because it findsways to prevent the disease,rather than just selling insulin.

CONTEXTS

The CONTEXTS that set the rules

of competition

• Improve inputs, supplychain and infrastructure to

protect current businessCafédirect works with its

growers to ensure their longterm survival and addresses

key risks in the coffee and teavalue chain.

• Seek regulation thatrewards responsibility

The Corporate Leaders Group on Climate Change

lobbies government to act onclimate change.

• Strategic alliances to address business

critical issuesThe Forest Stewardship Council

is a collaboration betweenNGOs and the industry .

Innovate for successInnovation is essential for business success and for the creation of a sustainable future. Leader businesses must innovate not only withtheir strategy and business models, but also in their delivery of newproducts and services with social and environmental benefits. Thisis one of the most exciting elements of what’s happening insustainable business today. The Sustento Fund, for example, wasset up by the global property company DTZ (see page 14) andfuture-proofs office investment through sustainable location, designand occupation.

Innovation is about having great ideas, but also about having the right systems in place to encourage and realise them. Sustainableinnovation focuses on products that tackle key social andenvironmental challenges. Vodafone’s M-Pesa (see page 15) is aprime example. This commercial venture gives people withoutaccess to traditional banking systems an opportunity to transferfunds and make payments through mobile phones.

Build new networks and seek to influenceBeing a leader business isn’t just about responding to the changing external context. It’s about using the powerof corporations to shape that context for the greater good. This might be through influencing regulation, orthrough coming together with others to tackle issues of concern. Dell and HP, for example, worked closely withthe state of Texas to introduce producer-owned recycling schemes (see page 21). Our hallmarks highlight theneed to have a ‘joined up’ approach so that companies do not seek to act in isolation.

Measure, learn and improveMost of the leader businesses that are featured in this report acknowledge that they are on a long journeytowards sustainability. They are evolving and embedding their vision and strategy through regular reinforcementand communication, both internally and externally. Good measurement systems are needed to support thisprocess, with a constant cycle of review, learning and improvement.

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Innovation for sustainability

To lead, you need to rethink your products and develop radical new ideas driven bysustainable development.

You need to develop moresustainable products, based onstrong assessment of current and potential performance.

Leader businesses havesustainability thinking embedded into their innovation processes.

• Download the bookletBreakthrough Products and Services,from our website to read more aboutinnovation for sustainability.8

today’s leader… tomorrow’s leader?Are today’s leading practices bold enough to overcome current global sustainability challenges? Do theydemonstrate a true understanding of the changes that are required to our social and economic systems? We suspect not.

Given the scale and complexity of the global sustainability challenge, there is a worrying lack of urgency fromgovernment and many business leaders. While there is definite evidence of progress from the leader businesseswe feature in this report, the current rate of change is not commensurate with the challenges that we face.

We do not believe that single-digit carbon reduction targets, or the use of language such as ‘where possible’, areadequate responses to current global challenges. We need to see an immediate injection of urgency, reflected infaster, braver and bolder action. On climate change we need a reduction in CO2 by 90% against 1990 levels by2050, with year-on-year targets along the way. Nothing less will do.

When the third edition of leader business is published in a few years’ time, we hope to be able to confirm thefollowing shifts in understanding, commitment and performance. If this occurs then the business community willhave demonstrated that it understands the scale of the challenge and is doing its bit to secure both our commonfuture, and its own prosperity.

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Sustainable growth in the driving seatThe company has understood that the pursuit of pure financial growth as a primary business driver is notsustainable. There is evidence of the development of new business models that are underpinned by theprinciples of sustainable consumption.

Private sector boldness The company is committed to absolute targets to cut carbon, waste and water use, defined by the latestscience rather than what is considered politically acceptable.

Respect for boundariesThere is a clear understanding of the business imperative of operating within ecosystem limits, with all busi-ness activities contributing to ecological renewal.

No more good, bad and uglyAll products and services are inherently sustainable. This means both that they contribute positively tomeeting the social and environmental challenges we face and that production methods and supply chainscomply with environmental limits.

The price is what it says on the tagReporting and accounting methodologies take full account of environmental and social costs, ensuring thatthe mainstream investment community is fully engaged in transforming the ways in which companies arevalued and capital markets function.

Whilst some of these shifts may seem far off today, we have to step up our efforts. The first attempt to report onenvironmental impacts in conjunction with financial reporting is said to be the Abt & Associates environmentreport back in 1972 - 36 years ago! Admittedly, a lot of progress has been made since. But many companies arestill not reporting on social and environmental issues, let alone changing their approach. This lack of fullyintegrated sustainability and financial reports is evidence that sustainability is still not seen as central to themajority of companies’ financial health. We can’t afford to let another 36 years pass without cracking challengessuch as climate change, global poverty and water scarcity. The best estimate is that we only actually have tenyears to do this.

Forum for the Future believes that we need to see a complete overhaul of our current governance and economicmodels. There is a huge imperative for change, and the opportunities presented are enormous. Any business thatunderstands the sustainability agenda will be well placed to navigate a more unpredictable world. Are you aleader business?

references1 See for example UNEP’s Global Environment Outlook 4 and Millennium Development Goals report 2007 2 Go to http://www.ipcc.ch/index.htm for the IPCC report. Read about the arctic summer sea ice here:http://www.independent.co.uk/environment/climate-change/collapse-of-arctic-sea-ice-has-reached-tippingpoint-440438.html 3 Al Gore and David Blood, Generation Investment Management, Finacial times, April 17 2008http://www.ft.com/cms/s/0/acf5d384-0b6b-11dd-8ccf-0000779fd2ac.html 4 We have drawn together our experience and wide-ranging academic thinking on change into a simple summaryand guide on organisational change, www.forumforthefuture.org.uk. See also Change Management forSustainable Development: a workbook. Penny Walker, September 2006, available from www.penny-walker.co.uk/publications_and_downloads.html 5 see our Sustainable Wealth Creation report for a detailed overview of environmental limits,www.forumforthefuture.org.uk/blog/sustainable-wealth-creation6 See www.forumforthefuture.org.uk for more about these frameworks7 Download the report, Leader Business Strategies, from www.forumforthefuture.org.uk/node/1271 8 www.forumforthefuture.org.uk/our-approach/innovation

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are you a leader business?leader business 2.0 showcases the latest, most exciting developmentsin corporate sustainability and raises the bar for tomorrow’s leaders.

Intended for anyone with responsibility for corporate strategy, its best-practice examples and stretching hallmarks will inspire and encouragetoday’s and tomorrow’s leaders to keep pushing the boundaries andexploring new business models.

www.forumforthefuture.org.uk

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