Small but perfectly formed....sort of

The launch of the GRI G4 reporting guidelines has generated something of a second coming atmosphere...well, at least within the cloistered world of sustainability disclosure.  The reporting faithful, in the form of accountants, verifiers, consultants, publishers, event organisers, corporate CSOs and other pilgrims journeyed to Amsterdam to obtain their copies of the sacred text.  This major event has of course generated intense theological dialogue on the merits or otherwise of materiality assessments and performance indicators.  Its manna for reporting zealots everywhere.

While their corporate brethren agonise over data versus engagement, an increasing number of smaller companies are facing up to the challenge of sustainability, either because they get it, or their customers are asking them the hard questions.  Whatever their motivation, a rapidly growing band of such companies, some listed, some private, are getting to grips with CSR, CR, sustainability (let’s leave the terminology debate for now) and opening themselves up to scrutiny.  Unlike their corporate cousins however, many of these companies are not hide-bound by the pressure to keep up with the neighbours on the reporting front.  Mention GRI to them and you might get into a discussion about General Rules of Implementation or Gross Rental Income. 

Mention, the cost of waste or raw materials, the challenge of recruitment and retention, charitable donations or volunteering, intricate questionnaires from customers or the growing regulatory burden and you will get their attention.  Please don’t mention carbon.  Those that are addressing sustainability, are doing so under these banners and just getting on with it in their own way.  Given their relative lack of resources and expertise, smaller companies embracing sustainability principles are:

Speaking to their sector peers to learn and share ideas, either directly or through trade and industry bodies.

Maximising the use of government sponsored support and advice.

Motivating employees through personal and professional development opportunities.

Embracing technologies that can reduce time and increase effectiveness.

Recognising the direct link to the bottom line and the need to disclose information on performance to retain or win business.

Those companies that are reporting are responding to customer pressure or seeing the competitive advantages.  The reports vary in form and size and some pay homage to GRI (the sustainability reporting protocol as opposed to Group Repeatibility Indicator), but in the main, they are an honest reflection of what is going on inside the business, even if on a limited basis. 

While the case for international reporting guidelines has been well made, countering corporate greenwash, the model that has developed has still allowed larger companies to duck the big issues, to finesse outputs and to generate reams of reportage that is inherently dull.   So let the corporate sustainability teams and their coterie of assessors and consultants adopt G4 and move to integrated reporting.   Will it solve the transparency deficit?  Will it be a mechanism for effecting fundamental change to business models?   I am not sure.  All I can say is that if you want to see open, honest and engaging communications you could do a lot worse than take a look at what some smaller companies are doing and saying about sustainability.

Twenty Twenty Vision

It seems ironic that there are two distinct meetings taking place with ‘20’ as the key number, where the fate of the world hangs on the decisions made.  At one, the G20 ministerial meeting is discussing the state and future of the global economy, at the other, Rio+20, some slightly less important ministers are discussing the state and future of the world’s environment.
While the lack of progress on a definitive Eurozone solution dominates the former, the lack of progress on a whole swath of sustainability commitments dominates the latter.  So between the 20 countries and across 20 years we see the shortcomings of global governance models and the inability of politicians, businesses and societies to think and act in the long term.  It is short term gain that created the global banking and sovereign debt crisis and the same impetus that is leading us towards a resource and climate crisis.

Perhaps the most frustrating thing is the fact that the relationship between future economic ‘prosperity’ and ecological wellbeing are still seen as being separate, parallel tracks, rather than functionally interdependent.  Assuming that one agrees with the tenet that ‘the world’s economy is a wholly owned subsidiary of the world’s ecology’.

There is hope though.  While the politicians enjoy the delights of Rio and tick their expenses boxes, much of the dynamism and idea generation is coming out of the businesses present at the second Earth Summit.  So, while the corporate presence at the first summit in 1992 was minimal, the corporate sector has started to wake up to the fact that finite resources and a changing climate offer both threats and opportunities for those that are willing to view sustainability as something more than CSR box ticking.  Yes, it is ironic that the market economy, which is held up as the great despoiler of the environment, might in fact be its best hope.

The companies that make products and provide services are starting to see that environment equals resource efficiency , costs, risks and opportunity.  Not only the corporate, but the smaller companies linked to them through supply chains.  The associated financial and investment community remain the laggards in this regard, over and above specialists with an interest environmental and social governance.  However, this picture is changing and slowly, very slowly, investors are waking up to sustainability as risk and opportunity, where performance indicators are aligned with the companies of which they have a slice.

The progressive companies are therefore preparing themselves for a world where finance and sustainability co-incide.  For many this begins with a basic re-assessment of priorities and associated process change and data monitoring around waste, water, raw materials and energy.  For most companies, a series of simple, low-cost measures will be the only possible step, but will offer a platform for taking a more sophisticated approach, where they can see cost savings and enhanced competitive advantage while managing cash effectively.  From this, the bigger prizes of new business models and product/service lines will flow.

Fairtrade, forestry and the fast-buck

There has been some reflection on the continued rise in sales of Fairtrade goods in the UK as we approach Fairtrade day on 12th May.  The UK is a significant market for such goods, with £1.3 billion spent each year, a figure that rose by 12% between 2010 and 2011.  Of this total, some 82% is accounted for by sales of coffee, cocoa products, sugar products and bananas.

The arguments for and against the efficacy and effectiveness of the Fairtrade system are often conflated with those of the so called ‘ethical’ or ‘green consumer’.   In other words, it is the consumer through their buying decisions that is driving the demand for Fairtrade products.  This argument was also deployed twenty years ago when the issue of imported tropical timber products became a cause celebre of the environmental movement.  From these scuffles independent certification schemes emerged such as that established and controlled by the Forest Stewardship Council or FSC.

Here the argument ran that individual consumers would go into their local DIY store and be faced with either a non-certified hardwood furniture set or an FSC certified hardwood furniture set.  The view prevailing that the latter would come at a premium because of the costs associated with sustainable management and certification.

As someone that helped to formulate the rules of the FSC and managed some of its pioneering audits in south-east Asia, I was able to observe its effects at close quarters and with interest.  The first thing to note is that history has shown that in the retail context, the price premium for certified timber products was a myth.  In addition, while the ‘chainsaw massacre’ campaigns played their part, the idea of the consumer driving the agenda was also misplaced.  Retailers such as B&Q observed the campaigns, however, they also saw the growing pressures on the supply side so took the decision out of the hands of the individual shopper by making it policy to supply, as far and as rapidly as possible, all of its timber products from certified sources.  Thus the family DIYmeister was relieved of the burden of choosing between clean or sullied rubberwood doors. 

Since those early days, some twenty years ago, the FSC has achieved a great deal and as of May 2012, 151 million hectares, or just over  5% of the world’s production forests had been certified.  However, it is worth noting that North America and Europe between them accounted for about 82% of the total certified forest areas, while the whole of Asia, including China, accounted for a mere 3.44%, consisting of 145 certificates out of a world total of 1125.  This is certainly progress since my mid-nineties forays into the forests of south-east Asia and in particular Indonesia, but what the numbers do perhaps illustrate is the scale of the challenge in this part of the world to establish a real and acceptable market value for standing forest and maintain it as such.  This scenario, as opposed to the continued pressure to extract valuable timber at an unsustainable rate and in a poor way and then convert what is left to a mono-crop or grazing.    Hence we see the continued shrinking in the area of standing natural forest and the efforts taken by the UN to initiate global schemes to price and monitor the existence of what is left for ‘ecosystem services’.

As it was then, so it is now, with big money continuing to talk in the south-east Asian forestry realm, despite the improved efforts of Governments to control malpractice.  Indeed, the rise of China as a major market has affected management and prices across the globe.  In my experience, the companies looking to buy FSC certified timber were small, insignificant players compared to those customers not too interested in the source and willing to buy hardwood timber, no questions asked, subject to quality, price and shipping suitability.

While both FSC and Fairtrade have undoubtedly achieved a great deal, facilitating fair and environmentally sound supply chains, the major challenge of making sustainability a mainstream business dynamic remains.  This will only happen when the global investment community recognises that the dynamics of sustainability are not soft, blurry and irrelevant, but are risk-based, fundamental drivers of value.  Perhaps surprisingly, given the ongoing claim and counter-claim in the climate change and carbon debate, things are starting to happen in the world of capital markets.  New models of management and investment are emerging and multinational corporations are actually starting to pay more than lip-service to sustainability.  While mechanisms that were designed to shape and by-pass capitalist models have had moderate success, it seems ironic that the true saviours of the planet may be local, national and international markets, the multinational corporations and marauding entrepreneurs.

Trees, Haggis and Babies

I have the distinct pleasure of speaking on business and sustainability at the Scotland Food & Drink AGM in Perth on 24th February.

The presentation, entitled 'Trees, Haggis & Babies' takes a quick whizz through my early days auditing forest management in Asia, helping Macsween create its sustainability reports and co-founding Totseat, the company that makes the world leading fabric highchair 'babies who lunch'.

See www.scotlandfoodanddrink.org

Don't Fight the Power, Like the Power

Expert panel uses film clips to explore a smart networked, low carbon energy future for Scotland

The Fintry Renewable Show, FRESH 2012, is playing host on March 9th to the entertaining debating format Moving Conversations.  ‘Power to the People – the citizen and energy independence’ brings together ice cream and wind power magnate, Maitland Mackie, localism activist and Chair of the Forestry Commission, Pam Warhurst, land ownership campaigner, Andy Wightman and renewable energy entrepreneur, Max Carcas.  Each will come armed with an entertaining clip from the Scottish Screen Archive with which they will try to convince the audience of the strength of their arguments.

FRESH 2012 organiser Kelly McIntyre said:
“While renewable energy is a serious subject, the village of Fintry wishes to celebrate the success and potential of low carbon technologies.  Hence FRESH, our third renewable energy show, will offer a wide array of talks, exhibitions, workshops, food, crafts and fun.  Moving Conversations is the centrepiece of our events schedule and with the line-up of experts, allied to some intriguing film clips, we can guarantee a fantastic wide-ranging debate on Scotland’s energy future.  Don’t fight the power, like the power!”

The Moving Conversations debate is set to explore the future of energy generation and use in Scotland.  Its particular focus will be on the potential for individuals and households to generate more of their own energy and control that which they use.  A key question will be if we can look forward to energy independence for the citizen, regardless of the political backdrop.  To fuel the debate, each panellist will show a clip that they have chosen from the Scottish Screen Archive, the national audiovisual collection, managed by the National Libraries of Scotland.

Organised by the Fintry Development Trust, FRESH 2012, takes place over the 9^th and 10^th March in and around the village of Fintry in Stirlingshire.  As well as talks, the festival includes demonstrations of micro-renewable power technologies, visits to domestic installations, a local food and crafts market, kids’ activities and trips around the local Earlsburn wind farm.  For more information visit www.fintrydt.org.uk

Moving Conversations is from 2.30-4pm on 9^th March in Menzies Hall, Main Street, Fintry.  The event is free to attend.

Creativity and sustainability - shurely shome mishtake

An upcoming conference in Edinburgh has its sights firmly set on the role that creativity can play in all areas of Scottish policy making, business and society.  While the so called ‘Creative Industries’ – film, art, broadcast, music, gaming – will inevitably be a focus, the conference sets out to identify how the wider business and government sectors can embrace the creative urge.  This may mean redesigning processes, products and business plans, embracing digital technologies or redefining the ways in which businesses and government deal with employees and indeed their customers.

This debate fuels my own view that the urge and need for reinvention also applies in business attitudes towards the environment and sustainability.  At the moment, as soon as the ‘E’ word is mentioned it induces well rehearsed arguments along the lines of “the debt crisis and recession are infinitely more important issues;” “head-hunters are telling me that demand for sustainability professionals has fallen off a cliff;” “we comply with legislation, and that is enough of a cost burden”, or “our customers are not asking about this stuff.”

While fully accepting that there are of course many and competing external pressures on business, there is a growing band of companies that have redefined the importance of sustainability and are seeing the rewards in cost savings, enhanced employee motivation, better management control and a much greater degree of competitive advantage.

With some noteable exceptions, the real business action on creativity and sustainability is taking place in small and medium sized enterprises.   One exception is Interface, world’s biggest producer of carpet tiles, founded by the late, great Ray Anderson in the 1970’s.  In the mid-1990’s he reinvented the business with environmental sustainability at its heart.  While still subject to the vagaries of the global market, Ray Anderson showed that sustainability and business success are not separate bedfellows. The company remains at the top of the flooring tree.

For small businesses, that decision to place sustainability to the fore and centre can be somewhat daunting, particularly as the first task is to decide what it means in its own context.  Having done so and defined priorities, the next major challenge is one of performance measurement, which means some data crunching.  All this takes time and resources, but there is lots of free advice and support out there from the likes of Zero Waste Scotland, Carbon Trust and business organisations such as FSB or the Scottish Food and Drink Federation.   Once the groundwork is done, the business can then review its performance or report to customers or financiers.

The latter are playing an increasingly interesting and important role as agents of sustainability, for if we accept the enhanced importance within a business, it inevitably has financial consequences.  These may be reducing overheads by diverting waste from landfill and turning this material into revenue as recyclate or an investment may be required in machinery to help process and store the waste.  Through having performance information to hand and a willingness to communicate, the business can respond to external scrutiny from customers and investors.  This scrutiny may be in the form of tendering requirements, where a ready response on questions about sustainability, not only saves on management time, but might help to win the business.

Where investment is required, the company’s bank may profit through working with a stronger business and providing asset finance for new plant or equipment.  Getting closer to the customer is an oft quoted banking aspiration, so, in the form of a sustainability dialogue, there is a way for the banks to [1] understand and de-risk their customers, existing and potential; [2] unearth new business from those customers and [3] promote some creativity and innovation within the bank’s own product development teams. 

The opportunities presented around sustainability are there for businesses and their financiers.  It just needs a bit of guts and some creativity.  That’s why I welcome the conference and its effort to provoke a debate on the wide ranging benefits of ‘creativity’ to Scotland’s future.

The Creativity Applied conference is organised by the RSA Fellows' Media, Creative Industries, Culture & Heritage Network and the Institute for Capitalising on Creativity, University of St Andrews.  It will take place on Monday 21st November 2011 at the Royal College of Physicians of Edinburgh, 9 Queen Street, Edinburgh EH2 1JQ.  The conference is free, but bookings should be made before 16^th November http://creativityapplied.eventbrite.com

Great Circle gets a slug of private equity

http://www.ft.com/cms/s/0/f9f3aacc-f29d-11e0-931e-00144feab49a.html#axzz1aKH3PlDL

The College Group (http://www.thecollegegroup.com/), including my business Great Circle (http://www.greatcircle.co.uk/), has received a substantial investment from private equity outfit Vitruvian Partners (http://www.vitruvianpartners.com/).  Onwards and upwards!