As a sustainability advisor to the West Michigan Food Processing Association (WMFPA), I recently had the opportunity to facilitate a WMFPA industry discussion with different levels of food manufacturing management regarding sustainability best practices. The session provided great insight about the significant difficulties companies are having addressing current supply chain issues and risks. The need for implementation of sustainability best practices to help improve decision making and create positive sustainability impact was prominent in the discussion. There were , however, several lingering issues that many of the companies were facing. Sustainability was mentioned as one of many initiatives that companies were currently undertaking. However, some programs appeared to be of more importance than others as some sustainability directives seemed to have lost their influence. So the question was raised about how to gain favor and support for sustainability programs with C Suite management?
First, who is C Suite management? Depending on the size of the company, these executive leaders can be CEOs, Presidents, COOs, CFOs, divisional leaders, and other key management decision makers. Each level of executive management may have its own lens when looking at sustainability projects and programs and these parameters must be taken into account. The good news is that stakeholders, investors, shareholders, and employees today have all become increasingly more aware of environmental and social sustainability issues and opportunities. The breadth of these perspectives can all be communicated with management on a regular basis to stay informed. The concerns about greenwashing have also diminished, as companies are now able to pursue sustainability certifications, guidelines, standards for their products and processes in their manufacturing and operations.
So then, what does the C suite management sales pitch on sustainability look like? What should the message be?
First, sustainability must show positive economic performance. There are a number of ways that sustainability programs and projects can demonstrate this performance. Short term, sustainability progress can be achieved through cost avoidance in comparison to current company bottom line results. These cost savings can be translated into improved gross margins and overall cost budgeting. One area that can provide great insight is the use of total cost accounting that embraces all externalities including direct and indirect cost burdens. Today, there are also several “ROI” proformas that can also be developed, such as environmental ROIs and social ROIs that use total cost accounting techniques and can determine specific environmental or social sustainability performance. Sustainability programs and projects must also be able to create longer term value through positive sustained economic, environmental, and social impact. One significant helpful metric to use for these cases is the determination of economic impact dollars that the sustainability program or project generates over time. Additionally, many companies are now embracing the Sustainability Accounting Standards Board (SASB) sustainability adjusted reporting guidelines for specific projects such as the Carbon Disclosure Project.
Second, the marketplace cares about sustainability. Consumers, regulators, employees, and stakeholders alike all care about sustainability because it affects each of our individual lives. There is a great conscious awareness of sustainability issues across the world today, whether it be scarce resources such as water, climate change, deforestation, waste pollution such as with plastics, social justice, food access etc. Patagonia has recognized that everything they make has an impact on the planet and set short and long term goals to reduce and even establish zero environmental impact goals for their company. New markets also care about sustainability. One new growing market is known as the LOHAS market or Lifestyles of Health and Sustainability. This retail market is estimated at $300B+ today with about 30% of consumers willing to purchase LOHAS products at higher prices because of the sustainability labels, certifications, and standards that the products meet.
Third, investors and customers care about sustainability. Today, there has been a deepening cry for more transparency from companies about their operations and reporting sustainability results especially around environmental impact, human rights, and social justice issues. Complex sustainability issues are evidenced on a worldwide scale and now interwoven into global commerce. One reporting framework that many global companies are adhering to today is environmental. social, and governance (ESG) reporting. The ISSB is becoming the benchmark standard for ESG disclosures that are integrated into financial reporting, as well as for strategic capital investments. In 2021 $1.5T in debt was issued for ESG projects globally and that number should almost double to $2.5T in 2022. Over 450 companies within the Glasgow Financial Alliance have pledged $130T towards net zero goals and programs. However, it is best to think about ESG as a lens or mindset of doing business, which can be transformed across the supply chain, and not just as a reporting standard. Long term net zero goals are fine to start, but there must be accountability and results demonstrated in the short term to make realistic progress towards net zero goals. There is more ESG compliance and additional regulations forthcoming in the near future, so it is prudent for management to get ahead of the curve now with these new ESG standards and protocols being implemented in the marketplace. And the ESG framework may well ensure the sustainability of your business model by also addressing both tangible and intangible business risks. Smaller to medium size companies (SMEs) can also develop balanced sustainability reporting and scorecards to ensure overall progress for their stakeholders as well.
For food companies, having an unblemished brand image is tantamount to success. Implementing sustainability best practices can help achieve that success and preserve brand image across company operations, while contributing to the bottom line. Customers, employees, stakeholders, and investors all really care about sustainability, and so should business leaders and management at all levels.
Sustainable Business Practices LLC
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