The United Nation’s Cancun Accords, once again shed light on the topsy-turvy world of international climate change policy. Significantly, the Accords move a step closer to binding emissions targets and recognise the need for monitoring and verification, stating that “internationally supported mitigation actions will be measured, reported and verified domestically and will be subject to international measurement, reporting and verification.” Having done my time auditing forest management in Indonesia, I am heartened to see the progress made to address the crucial issue of forest conservation. Reducing Emissions from Deforestation and Degradation, or REDD, establishes protocols for national forest protection plans and associated monitoring through satellite imagery. Crucially it invites developed nation governments and the private sector to invest in standing forest as a carbon sink, rather than source of timber.
At the same time Cancun also recognised the urgent need to start adapting to the consequences of climate change. The insurance industry has been engaged in order to get under the skin of the risks associated with extreme weather events. This is an area into which these companies are making significant investments. The main players in the insurance industry have clubbed together into ‘ClimateWise’ to share experiences in order to gain greater insights and respond to climate change. The 2010 independent review of ClimateWise describes the actions taken by different companies in relation to the schemes ‘principles’. These refer to risk analysis methods, informing public policy, supporting customer awareness, reducing the environmental impact of the businesses, reporting and incorporating climate change into investment strategies.
The latter is interesting, as it conjoins the wider debate about the relevance or otherwise of ‘sustainability’ within the context of a company’s performance. The impact on shareholder sentiment of major environmental incidents is self evident, however, the eco-sceptics, still see it as secondary to financial performance. What happens however, when extreme weather events create havoc with retail sales or productivity, the cost of extra heating takes a percentage point off the bottom line or illegal dumping of waste leads to a legal battle, hitting reputation and adding to the professional services cost line? The insurance companies have got it right, because they see climate change and sustainability as a ‘risk’ factor, not some woolly jumpered, yoghurt knitting concept.
The move to embrace adaptation is mirrored elsewhere. While the insurance companies have a clear stake in the implications of climate change – more intense rainfall, flooding, freezing and stifling hot temperature extremes. Other financial companies are also taking it seriously. The banks, over and above their own insurance businesses, are looking at the effects on the productivity of their business clients, mortgage deals on certain properties, asset finance for snow ploughs, corporate finance for novel irrigation systems and of course the ongoing flight to renewable energy.
The venture capitalists are not immune. They are seeing a rash of clean energy, environmental services and smart grid business plans, in other words, technologies that are designed to reduce carbon emissions or help people and companies adapt to changing weather patterns. These may be rapidly mobilised flood defences, under-floor heating for roads, cloud based energy monitoring systems, smart electricity distribution and runways and drainage systems for new houses. These plans and concepts are designed to reap commercial reward from climate change and environmental regulations and associated pressure from the supply chain.
The investment banks and fund managers will be monitoring regional and national climate trends in order to assess the operating context for their portfolio companies. They will also be putting money into REDD projects and fundraising for established clean technology and clean energy companies, not to mention taking some of them into the public markets.
All this of course provides such Scottish based financial companies with a huge opportunity to grow their businesses – with a slight change in attitude towards the sustainability agenda. While their oil and gas clients will continue to flex their muscles, the value of this business is in long term decline. The value of climate adaptation and sustainability based business is on a long term growth trajectory. For those institutions that are willing to look beyond tomorrow’s bonus and whom have the guts to sell this to their shareholders [many of whom will provide a sympathetic ear], the opportunities abound. Sustainability is one foundation stone on which Scotland’s re-shaped financial future can be built.
Thursday 23 December 2010
Tuesday 26 October 2010
Thinking - the next great business idea
According to Ove Arup, engineer, designer and philosopher and founder of the eponymous company, “the ultimate immoral act is choosing not to think.” This was quoted by Professor Emeritus Peter Jones as part of his 2010 Ove Arup Foundation Lecture, “Why are three heads better than one? Or: How to prepare for a new Enlightenment.” Professor Jones holds that the “cement of society is conversation and that when we ignore or lose our capacities for conversation we are in peril.”
While views vary on what constitutes a conversation, indeed, some hold that there is no such thing, the definition given at the lecture reads thus: “Conversation is a sacred and improvisatory practice in which the duty to listen precedes the right to speak.” It is essentially a practice because the skills required to be a good conversationalist have to be learned. A duty to listen reinforces the need for participants to understand the context and display appropriate manners. Consequently, the practicing conversationalist welcomes the opportunity to approach a topic from many directions and be open to the views of others while being happy to formulate and present their own arguments.
Ove Arup brought an array of experiences and an open, enquiring mind into the world of architecture and engineering. He noted that practitioners of both were not conversing and therefore, in his view, these disciplines needed reform, with a greater emphasis on learning from each other and opening their minds to other influences. This became the signature approach of his firm, one that applies today.
While the current economic situation has further reinforced the need for architects, engineers and designers to innovate and find new business models, the need to break out of disciplinary silos and actually think and converse is crucial for all companies and indeed governments and other institutions. By this way, can organisations find a way through the economic crisis and indeed plot a route to future success.
At the micro-level, this could begin by turning business meetings into conversations. Rather than mechanistic encounters where agenda items are ticked and the senior manager pontificates, all present have been schooled as conversationalists and all enter the meeting with an open mind and desire to tackle the agenda from many quarters, to learn, to assess, to think. While retrofitting a conversational ethos onto a company can be beneficial, the ultimate gift to society will be through structural changes to the way we educate young people – from nursery to university. Only the most ardent educational ideologue would disagree that we could be doing more to empower our school and university graduates with an ability to critically appraise, to question conventional methods and to posit their own views. While there will always be exceptions, the UK educational system needs to work harder, if its aim is to nurture thinking individuals.
Business too, is not a hotbed of thought and conversation, as the pressure to deliver on ‘key performance indicators’ takes precedence. The bigger the company, the less thought takes place as the job is driven by process and procedure. The smaller, dynamic entrepreneurial company though, is more of a cradle for silo breaking and thoughtfulness, but even then speed is more the order of the day.
For the businessman hungry for debate and conversation, there are opportunities out there, beyond the normal run of conferences and award ceremonies. For example, a desire to look beyond the here and now has been taken to heart by the Scottish urban regeneration community. An upcoming conference aims to take a creative and positive view of regeneration in the light of the economic crisis. Called Creative Approaches, the whole conference is built around ‘Moving Conversations’ which combines lively debate with film and television archive clips. The normal flood of bullet pointed slides has been replaced by rare footage and discussion, with the express aim of exploring ideas and stimulating new thinking amongst the public, private and voluntary sectors.
As Professor Jones concludes:
“Let us not further deceive ourselves into believing that, over the centuries, Governments or Instituitions or Professions have always, or even very often, put into place people and resources to promote relentless, self-critical and exploratory thinking.”
Far from being a luxury that a business cannot afford, finding the time to think might be just what all Chief Executives need right now.
While views vary on what constitutes a conversation, indeed, some hold that there is no such thing, the definition given at the lecture reads thus: “Conversation is a sacred and improvisatory practice in which the duty to listen precedes the right to speak.” It is essentially a practice because the skills required to be a good conversationalist have to be learned. A duty to listen reinforces the need for participants to understand the context and display appropriate manners. Consequently, the practicing conversationalist welcomes the opportunity to approach a topic from many directions and be open to the views of others while being happy to formulate and present their own arguments.
Ove Arup brought an array of experiences and an open, enquiring mind into the world of architecture and engineering. He noted that practitioners of both were not conversing and therefore, in his view, these disciplines needed reform, with a greater emphasis on learning from each other and opening their minds to other influences. This became the signature approach of his firm, one that applies today.
While the current economic situation has further reinforced the need for architects, engineers and designers to innovate and find new business models, the need to break out of disciplinary silos and actually think and converse is crucial for all companies and indeed governments and other institutions. By this way, can organisations find a way through the economic crisis and indeed plot a route to future success.
At the micro-level, this could begin by turning business meetings into conversations. Rather than mechanistic encounters where agenda items are ticked and the senior manager pontificates, all present have been schooled as conversationalists and all enter the meeting with an open mind and desire to tackle the agenda from many quarters, to learn, to assess, to think. While retrofitting a conversational ethos onto a company can be beneficial, the ultimate gift to society will be through structural changes to the way we educate young people – from nursery to university. Only the most ardent educational ideologue would disagree that we could be doing more to empower our school and university graduates with an ability to critically appraise, to question conventional methods and to posit their own views. While there will always be exceptions, the UK educational system needs to work harder, if its aim is to nurture thinking individuals.
Business too, is not a hotbed of thought and conversation, as the pressure to deliver on ‘key performance indicators’ takes precedence. The bigger the company, the less thought takes place as the job is driven by process and procedure. The smaller, dynamic entrepreneurial company though, is more of a cradle for silo breaking and thoughtfulness, but even then speed is more the order of the day.
For the businessman hungry for debate and conversation, there are opportunities out there, beyond the normal run of conferences and award ceremonies. For example, a desire to look beyond the here and now has been taken to heart by the Scottish urban regeneration community. An upcoming conference aims to take a creative and positive view of regeneration in the light of the economic crisis. Called Creative Approaches, the whole conference is built around ‘Moving Conversations’ which combines lively debate with film and television archive clips. The normal flood of bullet pointed slides has been replaced by rare footage and discussion, with the express aim of exploring ideas and stimulating new thinking amongst the public, private and voluntary sectors.
As Professor Jones concludes:
“Let us not further deceive ourselves into believing that, over the centuries, Governments or Instituitions or Professions have always, or even very often, put into place people and resources to promote relentless, self-critical and exploratory thinking.”
Far from being a luxury that a business cannot afford, finding the time to think might be just what all Chief Executives need right now.
Thursday 9 September 2010
Its an ecosystem Jim, but not as we know it
Amidst the ongoing talk of a ‘green’ dividend for the Scottish economy and the creation of thousands of eco jobs, I am encouraged to hear of that last week British wind farms have provided over 5% of electricity to the UK national grid over the period of a day . Over one hour on Sunday 29th August, wind turbines in the north of Scotland produced more energy, approximately 700MW, than was required by customers. Add this to the recent expansion of Whitelees Wind Farm, already the biggest in Europe, and all seems to be going swimmingly in the clean energy world. Not to mention the onward expansion of offshore wind, wave and tidal energy technologies.
Even the hardest sceptics are perhaps coming to accept that there may be something in all of this green eco stuff. Something that smells of money as opposed to freshly mown grass or wildflower meadows (prescious few of which remain alas). These same sceptics rightly pointed out that wind turbines [on or offshore] require less manpower to maintain, however, they missed the many other jobs in design, engineering, support, consultancy, IT, marketing and finance that have and will be created. While renewable have been grabbing all the glory, the green dividend will also be reaped through a whole host of other companies and organisations that will create a wide variety of jobs and add economic value in previously unseen ways – an ecosystem if you like.
This ecosystem will contain financial services companies such as the Green Insurance Company that recently announced record profits and the creation of 60 new jobs in Scotland. While the ‘green’ element of this company primarily relates to the purchase of carbon offsets of customer vehicle emissions, this business model will no doubt develop. For example, low carbon travel insurance or vehicle or business cover that prices in carbon emission or waste reductions. Other financial service providers will also emerge from existing companies or start ups. Banks’ asset finance operations will grow through funding for clean technologies, possibly building the value of waste, water or carbon savings into the lending formulae. Auditors and accountants will grow their assurance business as more companies choose or are compelled to disclose their environmental and sustainability performance. Fund managers will start to take climate change adaptation seriously and turn to the vast array of data and experience at the Met Office to draw up regional risk and investment profiles.
In addition to the finance jobs, there will be work aplenty for those that actually do the work and get their hands dirty helping to reduce environmental impacts. There will be opportunities for the entrepreneurs and companies that develop and sell technology to decontaminate water, reduce water use, recycle waste, reuse waste, clean contaminated land, monitor and scrub air pollution, monitor and reduce energy. The list goes on. These jobs will be research based, operational, marketing and financial – either in house or supporting outsourced providers.
Within and around this, there will be a growing band of companies that continue to sell food, chemicals, consumer goods and many other products or services, while taking greater control over their impacts on the environment. These companies will be users of the services and products offered from elsewhere within the ecosystem, whether it be to reduce waste or energy, for example. These companies will do so because they see the opportunity to be leaner, more cost efficient and pursue competitive advantage through greater control and disclosure of their environmental performance. While they may be responding to pressure from their own customers, they will pass this pressure up the supply chain and demand greater scrutiny of their own suppliers. Thereby the ecosystem propagates and thrives, with all parts linked to and depending on others.
Accepting the above, the green dividend could be very significant for Scotland as a home for clean technology and service companies and other companies tackling their environmental impacts. The ultimate environmental good is hard to predict, however, the need to adapt to a changing climate will be ever present anyway. Our ecosystems are changing, long live the ecosystem.
Even the hardest sceptics are perhaps coming to accept that there may be something in all of this green eco stuff. Something that smells of money as opposed to freshly mown grass or wildflower meadows (prescious few of which remain alas). These same sceptics rightly pointed out that wind turbines [on or offshore] require less manpower to maintain, however, they missed the many other jobs in design, engineering, support, consultancy, IT, marketing and finance that have and will be created. While renewable have been grabbing all the glory, the green dividend will also be reaped through a whole host of other companies and organisations that will create a wide variety of jobs and add economic value in previously unseen ways – an ecosystem if you like.
This ecosystem will contain financial services companies such as the Green Insurance Company that recently announced record profits and the creation of 60 new jobs in Scotland. While the ‘green’ element of this company primarily relates to the purchase of carbon offsets of customer vehicle emissions, this business model will no doubt develop. For example, low carbon travel insurance or vehicle or business cover that prices in carbon emission or waste reductions. Other financial service providers will also emerge from existing companies or start ups. Banks’ asset finance operations will grow through funding for clean technologies, possibly building the value of waste, water or carbon savings into the lending formulae. Auditors and accountants will grow their assurance business as more companies choose or are compelled to disclose their environmental and sustainability performance. Fund managers will start to take climate change adaptation seriously and turn to the vast array of data and experience at the Met Office to draw up regional risk and investment profiles.
In addition to the finance jobs, there will be work aplenty for those that actually do the work and get their hands dirty helping to reduce environmental impacts. There will be opportunities for the entrepreneurs and companies that develop and sell technology to decontaminate water, reduce water use, recycle waste, reuse waste, clean contaminated land, monitor and scrub air pollution, monitor and reduce energy. The list goes on. These jobs will be research based, operational, marketing and financial – either in house or supporting outsourced providers.
Within and around this, there will be a growing band of companies that continue to sell food, chemicals, consumer goods and many other products or services, while taking greater control over their impacts on the environment. These companies will be users of the services and products offered from elsewhere within the ecosystem, whether it be to reduce waste or energy, for example. These companies will do so because they see the opportunity to be leaner, more cost efficient and pursue competitive advantage through greater control and disclosure of their environmental performance. While they may be responding to pressure from their own customers, they will pass this pressure up the supply chain and demand greater scrutiny of their own suppliers. Thereby the ecosystem propagates and thrives, with all parts linked to and depending on others.
Accepting the above, the green dividend could be very significant for Scotland as a home for clean technology and service companies and other companies tackling their environmental impacts. The ultimate environmental good is hard to predict, however, the need to adapt to a changing climate will be ever present anyway. Our ecosystems are changing, long live the ecosystem.
Wednesday 8 September 2010
Banging on about sustainability as competitive advantage
My brief talk at the Thrive for Business event on the subject of Corporate Social Responsibility....
Over the next five minutes I will attempt to argue that CSR is ‘common sense really’, nothing more and nothing less than good old fashioned governance and a source of competitive advantage. Since we have to call it something this morning, I will refer to it as ‘sustainability’ – why use three words when one will do.
Before getting into practicalities, its worth mulling over the question of who drives the sustainability agenda. Orthodoxy says that sustainability should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the sustainability industry. Here perhaps, and this is admittedly a cynical view, the agenda is less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, sustainability also comes with its own mountain of written material. However, if you ask me too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating.
Fundamentally, sustainability is about commercial longevity, which is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them.
While this is all well and good, how do customers, regulators, investors and others take a view on a company’s sustainability record when there is no official ‘standard’ against which companies can be measured. The corporates have been producing detailed Corporate Responsibility or Sustainability reports for many years and signing up to voluntary sustainability standards such as AA1000, BS8901, GRI, however, questions remain about their effectiveness as genuine tools of transparency. At the same time, the pressure has been growing on smaller companies to disclose more information on their environmental performance or their record in relation to employees and local communities.
At its basic level, this pressure is coming from a growing raft of eco, HR and disclosure regulations which drive up the costs and associated risks of non-compliance. For those companies supplying the supermarkets, take heed. The buyers may not be asking about sustainability now, but they will start doing so over the next few years. This is already happening in relation to certain products, for example, European legislation that targets imports of illegal timber. Suppliers of other products should start preparing for increased scrutiny.
Consequently let us forget sustainability, as the soft and fluffy, nice to have, lets think of it as a necessary pre-requisite for growing a business and being prepared for that moment when the legislators, customers or even financiers come knocking. From its eco-roots, sustainability has emerged blinking into the light as a full-blown source of competitive advantage, particularly in a world chasing a diminishing number of public sector contracts and fighting pressure on margins.
So while its fine for the multinationals, what about small and medium sized business. How should they respond to the pressure – if it exists for them:
Firstly, ensure that it is taken seriously at Board and senior management level. Noting here that the drive to be more sustainable may come from the top.
Secondly, seek advice. There is loads of it out there and much of it is free. Speak to Envirowise, Zero Waste Scotland, CarbonTrust, Environmental Protection Agency, Ethical Trading Initiative, trade associations and any number of other organisations. They can help with advice, audits, standard setting and contacts.
Next. Start to measure performance and put in place a simple roadmap to manage in the long term. A management system may be appropriate, it may not. Also think through the expectations of your employees – how can they help and contribute. Your customers and suppliers may also have questions, particularly where you are bidding for new work or terms of trade are changed, with greater emphasis on sustainability.
At the same time, somehow work out a means of managing and monitoring sustainability in the long term. You may not be able to afford the resources to do this in-house, but perhaps its a part-time role or one that can be economically outsourced, perhaps to one or other of the organisations offering free or low cost services.
Finally, learn how to communicate what you are doing. This will be required in order to speak and listen to your employees, however, it will also be important when customers and others come calling, looking for a concise and credible summary of your actions in relation to sustainability. By this stage you may be able to report on how you have saved on landfill costs, found outlets for waste packaging, reduced your water and wastewater bills, saved on energy costs, reduced the risk from poor suppliers and raw materials, won more work and motivated employees. You might even have developed new products and services.
Along the way, you will find and benefit from companies who have taken a similar view. If you have international ambitions, not only will it free up some cash for export marketing [through greater resource efficiency and employee motivation], it will be a fantastic calling card, since all key international markets are upping their own scrutiny of sustainability performance.
While there will be up-front cost, some of this outlay will be required for compliance purposes anyway. The rest, if spent wisely, will more than pay itself back through greater resource efficiency, lower bills, more business and a better reputation. Double dip or not, I would urge Directors of companies to revisit sustainability, not as eco-irrelevance, but as part and parcel of competitive advantage.
Over the next five minutes I will attempt to argue that CSR is ‘common sense really’, nothing more and nothing less than good old fashioned governance and a source of competitive advantage. Since we have to call it something this morning, I will refer to it as ‘sustainability’ – why use three words when one will do.
Before getting into practicalities, its worth mulling over the question of who drives the sustainability agenda. Orthodoxy says that sustainability should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the sustainability industry. Here perhaps, and this is admittedly a cynical view, the agenda is less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, sustainability also comes with its own mountain of written material. However, if you ask me too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating.
Fundamentally, sustainability is about commercial longevity, which is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them.
While this is all well and good, how do customers, regulators, investors and others take a view on a company’s sustainability record when there is no official ‘standard’ against which companies can be measured. The corporates have been producing detailed Corporate Responsibility or Sustainability reports for many years and signing up to voluntary sustainability standards such as AA1000, BS8901, GRI, however, questions remain about their effectiveness as genuine tools of transparency. At the same time, the pressure has been growing on smaller companies to disclose more information on their environmental performance or their record in relation to employees and local communities.
At its basic level, this pressure is coming from a growing raft of eco, HR and disclosure regulations which drive up the costs and associated risks of non-compliance. For those companies supplying the supermarkets, take heed. The buyers may not be asking about sustainability now, but they will start doing so over the next few years. This is already happening in relation to certain products, for example, European legislation that targets imports of illegal timber. Suppliers of other products should start preparing for increased scrutiny.
Consequently let us forget sustainability, as the soft and fluffy, nice to have, lets think of it as a necessary pre-requisite for growing a business and being prepared for that moment when the legislators, customers or even financiers come knocking. From its eco-roots, sustainability has emerged blinking into the light as a full-blown source of competitive advantage, particularly in a world chasing a diminishing number of public sector contracts and fighting pressure on margins.
So while its fine for the multinationals, what about small and medium sized business. How should they respond to the pressure – if it exists for them:
Firstly, ensure that it is taken seriously at Board and senior management level. Noting here that the drive to be more sustainable may come from the top.
Secondly, seek advice. There is loads of it out there and much of it is free. Speak to Envirowise, Zero Waste Scotland, CarbonTrust, Environmental Protection Agency, Ethical Trading Initiative, trade associations and any number of other organisations. They can help with advice, audits, standard setting and contacts.
Next. Start to measure performance and put in place a simple roadmap to manage in the long term. A management system may be appropriate, it may not. Also think through the expectations of your employees – how can they help and contribute. Your customers and suppliers may also have questions, particularly where you are bidding for new work or terms of trade are changed, with greater emphasis on sustainability.
At the same time, somehow work out a means of managing and monitoring sustainability in the long term. You may not be able to afford the resources to do this in-house, but perhaps its a part-time role or one that can be economically outsourced, perhaps to one or other of the organisations offering free or low cost services.
Finally, learn how to communicate what you are doing. This will be required in order to speak and listen to your employees, however, it will also be important when customers and others come calling, looking for a concise and credible summary of your actions in relation to sustainability. By this stage you may be able to report on how you have saved on landfill costs, found outlets for waste packaging, reduced your water and wastewater bills, saved on energy costs, reduced the risk from poor suppliers and raw materials, won more work and motivated employees. You might even have developed new products and services.
Along the way, you will find and benefit from companies who have taken a similar view. If you have international ambitions, not only will it free up some cash for export marketing [through greater resource efficiency and employee motivation], it will be a fantastic calling card, since all key international markets are upping their own scrutiny of sustainability performance.
While there will be up-front cost, some of this outlay will be required for compliance purposes anyway. The rest, if spent wisely, will more than pay itself back through greater resource efficiency, lower bills, more business and a better reputation. Double dip or not, I would urge Directors of companies to revisit sustainability, not as eco-irrelevance, but as part and parcel of competitive advantage.
Tuesday 31 August 2010
The ‘many’ heroes of the Battle of Britain
The 70th anniversary of the Battle of Britain is rightly receiving the attention it deserves. While Scotland remains geographically distant from the airspace that saw the heaviest of the aerial combat between 10th July and 31st October 1940, we should not forget that Scottish born squadrons fought with distinction and gained their Battle of Britain honours. Both 602 ‘City of Glasgow’ and 603 ‘City of Edinburgh’ squadrons were involved in the harsh, unforgiving combat within the 11 Group sector over south-east England and the English Channel.
The anniversary brought to mind a Moving Conversation that I organised one September at Edinburgh’s Dominion Cinema, on the subject of the Battle of Britain. We preceded a showing of the 1969 film of that name with some short but telling contributions from the then Commanding Officer of 603 Squadron, a Tornado pilot from RAF Leuchars and a historian of 602 Squadron. While we could not be joined by one of Scotland’s surviving fighter pilots, we were honoured to hear from Squadron Leader Andrew Jackson, DFC, AE, MID, who had flown two operational tours, including the first bombing raids over Berlin in August 1940. These raids took place during the full heat of the Battle, at which time the Luftwaffe was dealing heavy blows to the RAF’s Fighter Command airbases and associated infrastructure. As a morale booster more than anything else, Winston Churchill ordered the bombing raids on Berlin.
Andrew Jackson described the raids in his Aircrew Association paper ‘The First Raids on Berlin’, “On the 28th August 1940, we took off from Norwich Airfield, as an advanced base from Marham to attack Berlin, on the first operation by Wellington bombers....Search lights and heavy flak were encountered on our flight, but over the actual target there was very little opposition – not what we expected. We had a clear view of the city and the marshalling yards were easily identified and attacked. Two nights later we returned to be met by numerous searchlights and well-directed and intensive flak. The enemy was learning fast!”
History shows that these raids were decisive factors in Hitler and Luftwaffe chief, Goering’s decision to concentrate their own bombing efforts on British ports and railways, thereby providing the RAF with some desperately needed relief. With the change of tactics, came greater success for Fighter Command, ultimately leading to the decision to withdraw the German invasion forces gathered on the French coast.
While the Berlin raids were astounding at that time, throughout the summer of 1940, Bomber Command continued to harass the German invasion fleet and destroy shipping in the heavily defended French ports of Dunkirk, Calais and Ostend. The role of these crews and those whom flew to Berlin during 1940, should be acknowledged, as should those of the men and women who kept the aircraft in the air, transported men and machines across the Atlantic and the UK, designed, built and tested the aircraft, designed and manned the control and radar centres, trained the pilots, manned observation posts and the many others that combined to keep the aircraft in the air and homing in on their targets. Not to mention of course, the now legendary young men of Fighter Command, whom took on the German bombers and their fighter escorts.
That night at the Dominion Cinema left an indelible mark, confirming the debt of gratitude that we owe men like Andrew Jackson, whom accepted the need to act in the interest of their country while forging unbreakable bonds with their Squadron colleagues under the greatest of pressure. While historians continue to debate the Battle of Britain’s significance in the great scheme of the Second World War, in this 70th anniversary year we should remember the Fighter Command’s ‘few’ and the those from other arms of the RAF, working in the air and on the ground. I will leave the last word to Andrew Jackson, “Britain was saved from invasion by the Royal Air Force, and that was what the Battle of Britain was all about. The young men from the UK and overseas stood side by side, risking all, with many paying the ultimate price in violent death. We owe them a huge debt!”
Sadly, Squadron Leader Jackson died in 2009. We owe him and his generation a huge debt.
The anniversary brought to mind a Moving Conversation that I organised one September at Edinburgh’s Dominion Cinema, on the subject of the Battle of Britain. We preceded a showing of the 1969 film of that name with some short but telling contributions from the then Commanding Officer of 603 Squadron, a Tornado pilot from RAF Leuchars and a historian of 602 Squadron. While we could not be joined by one of Scotland’s surviving fighter pilots, we were honoured to hear from Squadron Leader Andrew Jackson, DFC, AE, MID, who had flown two operational tours, including the first bombing raids over Berlin in August 1940. These raids took place during the full heat of the Battle, at which time the Luftwaffe was dealing heavy blows to the RAF’s Fighter Command airbases and associated infrastructure. As a morale booster more than anything else, Winston Churchill ordered the bombing raids on Berlin.
Andrew Jackson described the raids in his Aircrew Association paper ‘The First Raids on Berlin’, “On the 28th August 1940, we took off from Norwich Airfield, as an advanced base from Marham to attack Berlin, on the first operation by Wellington bombers....Search lights and heavy flak were encountered on our flight, but over the actual target there was very little opposition – not what we expected. We had a clear view of the city and the marshalling yards were easily identified and attacked. Two nights later we returned to be met by numerous searchlights and well-directed and intensive flak. The enemy was learning fast!”
History shows that these raids were decisive factors in Hitler and Luftwaffe chief, Goering’s decision to concentrate their own bombing efforts on British ports and railways, thereby providing the RAF with some desperately needed relief. With the change of tactics, came greater success for Fighter Command, ultimately leading to the decision to withdraw the German invasion forces gathered on the French coast.
While the Berlin raids were astounding at that time, throughout the summer of 1940, Bomber Command continued to harass the German invasion fleet and destroy shipping in the heavily defended French ports of Dunkirk, Calais and Ostend. The role of these crews and those whom flew to Berlin during 1940, should be acknowledged, as should those of the men and women who kept the aircraft in the air, transported men and machines across the Atlantic and the UK, designed, built and tested the aircraft, designed and manned the control and radar centres, trained the pilots, manned observation posts and the many others that combined to keep the aircraft in the air and homing in on their targets. Not to mention of course, the now legendary young men of Fighter Command, whom took on the German bombers and their fighter escorts.
That night at the Dominion Cinema left an indelible mark, confirming the debt of gratitude that we owe men like Andrew Jackson, whom accepted the need to act in the interest of their country while forging unbreakable bonds with their Squadron colleagues under the greatest of pressure. While historians continue to debate the Battle of Britain’s significance in the great scheme of the Second World War, in this 70th anniversary year we should remember the Fighter Command’s ‘few’ and the those from other arms of the RAF, working in the air and on the ground. I will leave the last word to Andrew Jackson, “Britain was saved from invasion by the Royal Air Force, and that was what the Battle of Britain was all about. The young men from the UK and overseas stood side by side, risking all, with many paying the ultimate price in violent death. We owe them a huge debt!”
Sadly, Squadron Leader Jackson died in 2009. We owe him and his generation a huge debt.
Wednesday 11 August 2010
The Transparency Express
As we enter a period of concern over a double-dip recession, the poor old small business continues to fight on in the economic trenches. While the bankers continue to party and play the Government like salmon in the Tweed, the case for corporate sustainability would seem to be somewhat weakened. While the orgy of recrimination around the so-called climategate scandal has muddied the waters around global warming, the fundamental logic for companies to do something about waste, resources and energy remains, regardless of what the carbon footprint brigade or climate-sceptics might be arguing.
At its basic level, small businesses have to respond to a growing raft of eco-regulations which drive up the costs and associated risks of non-compliance. By being prepared, there are opportunities to save money, earn revenues, win new business and increase value.
For those companies supplying the supermarkets, take heed. The buyers may not be asking about sustainability now, but they will start doing so over the next few years. This is already happening in relation to certain products, for example, European legislation that targets imports of illegal timber. Suppliers of other products should start preparing for increased scrutiny.
Rather than consign sustainability to the pending tray, this is the pefect time to address it, in preparation for that moment when the legislators, customers or even financiers come knocking. From its eco-roots, sustainability has emerged blinking into the light as a full-blown source of competitive advantage, particularly in a world chasing a diminishing number of public sector contracts and fighting pressure on margins.
Having recognised the logic, how does the small business proceed if it wishes to take sustainability out of the box marked ‘eco-freak’ or ‘tree hugger’. Here are some tips:
Firstly, ensure that it is taken seriously at Board and senior management level.
Secondly, seek advice. There is loads of it out there and much of it is free. Speak to Envirowise, WRAP, Zero Waste Scotland, CarbonTrust, Scottish Environmental Protection Agency, Ethical Trading Initiative, trade associations and any number of other organisations. They can help with advice, audits, standard setting and contacts.
Next. Start to measure performance and put in place a simple roadmap to manage in the long term. A management system may be appropriate, it may not. Also think through the expectations of your employees – how can they help and contribute. Your customers and suppliers may also have questions, particularly where you are bidding for new work or terms of trade are changed, with greater emphasis on sustainability.
At the same time, somehow work out a means of managing and monitoring sustainability in the long term. You may not be able to afford the resources to do this in-house, but perhaps its a part-time role or one that can be economically outsourced.
Finally, learn how to communicate what you are doing. This will be required in order to speak and listen to your employees, however, it will also be important when customers and others come calling, looking for a concise and credible summary of your actions in relation to sustainability. By this stage of course, you will be able to report on how you have saved on landfill costs, found outlets for waste packaging, reduced your water and wastewater bills, saved on energy costs, reduced the risk from poor suppliers and raw materials, won more work and motivated employees. You might even have developed new products and services in response to the green, eco, ethical or sustainability agenda – whatever you wish to call it.
Along the way, you will find and benefit from companies who have taken a similar view, which can only be a good thing. If you have international ambitions, not only will it free up some cash for export marketing [through greater resource efficiency and employee motivation], it will be a fantastic calling card, since all key international markets are upping their own scrutiny of sustainability performance.
Like all management and process change, it is not easy. The plethora of support agencies can be confusing, however, in Scotland many of these agencies have been consolidated – which helps.
While there will be up-front cost, some of this outlay will be required for compliance purposes anyway. The rest, if spent wisely, will more than pay itself back through greater resource efficiency, lower bills, more business and a better reputation. Double dip or not, I would urge Directors of small companies to revisit sustainability, not as eco-irrelevance, but as part and parcel of competitive advantage.
At its basic level, small businesses have to respond to a growing raft of eco-regulations which drive up the costs and associated risks of non-compliance. By being prepared, there are opportunities to save money, earn revenues, win new business and increase value.
For those companies supplying the supermarkets, take heed. The buyers may not be asking about sustainability now, but they will start doing so over the next few years. This is already happening in relation to certain products, for example, European legislation that targets imports of illegal timber. Suppliers of other products should start preparing for increased scrutiny.
Rather than consign sustainability to the pending tray, this is the pefect time to address it, in preparation for that moment when the legislators, customers or even financiers come knocking. From its eco-roots, sustainability has emerged blinking into the light as a full-blown source of competitive advantage, particularly in a world chasing a diminishing number of public sector contracts and fighting pressure on margins.
Having recognised the logic, how does the small business proceed if it wishes to take sustainability out of the box marked ‘eco-freak’ or ‘tree hugger’. Here are some tips:
Firstly, ensure that it is taken seriously at Board and senior management level.
Secondly, seek advice. There is loads of it out there and much of it is free. Speak to Envirowise, WRAP, Zero Waste Scotland, CarbonTrust, Scottish Environmental Protection Agency, Ethical Trading Initiative, trade associations and any number of other organisations. They can help with advice, audits, standard setting and contacts.
Next. Start to measure performance and put in place a simple roadmap to manage in the long term. A management system may be appropriate, it may not. Also think through the expectations of your employees – how can they help and contribute. Your customers and suppliers may also have questions, particularly where you are bidding for new work or terms of trade are changed, with greater emphasis on sustainability.
At the same time, somehow work out a means of managing and monitoring sustainability in the long term. You may not be able to afford the resources to do this in-house, but perhaps its a part-time role or one that can be economically outsourced.
Finally, learn how to communicate what you are doing. This will be required in order to speak and listen to your employees, however, it will also be important when customers and others come calling, looking for a concise and credible summary of your actions in relation to sustainability. By this stage of course, you will be able to report on how you have saved on landfill costs, found outlets for waste packaging, reduced your water and wastewater bills, saved on energy costs, reduced the risk from poor suppliers and raw materials, won more work and motivated employees. You might even have developed new products and services in response to the green, eco, ethical or sustainability agenda – whatever you wish to call it.
Along the way, you will find and benefit from companies who have taken a similar view, which can only be a good thing. If you have international ambitions, not only will it free up some cash for export marketing [through greater resource efficiency and employee motivation], it will be a fantastic calling card, since all key international markets are upping their own scrutiny of sustainability performance.
Like all management and process change, it is not easy. The plethora of support agencies can be confusing, however, in Scotland many of these agencies have been consolidated – which helps.
While there will be up-front cost, some of this outlay will be required for compliance purposes anyway. The rest, if spent wisely, will more than pay itself back through greater resource efficiency, lower bills, more business and a better reputation. Double dip or not, I would urge Directors of small companies to revisit sustainability, not as eco-irrelevance, but as part and parcel of competitive advantage.
Tuesday 10 August 2010
Diamonds are For Every Business Cycle
I woke up this morning to the headline BBC news that veteran supermodel Naomi Campbell was to appear before a war crimes tribuneral for accepting gifted blood diamonds from disgraced former dictator Charles Taylor. Leaving aside the questionable editorial policy from the twenty somethings in Auntie’s newsroom, thoughts of carbon based gems were floating around when I read the obituary of Tom Mankiewicz, screenwriter on my favourite Bond film, Diamonds are Forever.
It was the first Bond film that I watched at the cinema, transfixed by the moon buggy and frustrated that I never owned the Corgi, or was it Dinky, version. I think too that it was the first screen violence I can remember witnessing, particularly the scene where Bond sends diamond smuggler Peter Franks to his death with the aid of a fire extinguisher. Brutal in the extreme, but I emerged suitably shaken, not stirred.
Childhood memories aside, I did not realise it at the time that this was Connery’s comeback to Bond, after the Lazenby interlude [not as wooden as given credit for], lured back with a $1 million fee and $10,000 a week wages. Quite a sum at the time, but infinitely more value than your average SPL or Premier League showman.
While not wishing to venture into ‘best Bond’ territory, it struck me that those of us in business in Scotland could take a page or two out of the book of Connery to guide us going forward.
First lesson, he started local, but built a global phenomenon. Starting from his milk delivery days in Fountainbridge, Connery pursued and ultimately realised his vision. It took him six years from his first film part to his breakthough in 1962’s Dr No. He accepted the small parts, dealt with the inevitable crap, but kept his eye on the prize. A lesson for all budding entrepreneurs!
Secondly, he grabbed the opportunity and ran with it. Bond might not have made him. He might not have been in the right place at the right time. We might have hated his interpretation. He played the legendary spy his way and it worked. That combination of clarity, sophistication, looks and ruthlessness won the fights, the girls and the audiences. While there may be something here for the entrepreneur to emulate, its more about the strength of character to move away from home turf and mix it with an alien culture, in this case Hollywood, and not be cowed or manipulated. Surely this must be a fantastic example of internationalisation.
Having made it to the big time and secured his cash cow, Connery then realised that there must be more to life. More product with which to grow his personal brand. He was not afraid to step off the Bond bandwagon and negotiate the maze of undoubted crazy offers and ridiculous roles. As David Thompson has put it, he has made strange film choices but he retained and retains public affection. Something brands aspire too. The lesson here being the need to accept failures as part of the baggage of ambitious business. Just keep the faith and the successes will come.
We then return to Diamonds are Forever. Our hero was not afraid to change his mind and take the money, and while this may have been death to brand Connery, in fact turned out a cracking performance in a cracking film. Opportunism is an oft underated trait. Although, the less said about Never Say Never Again, the better.
After 54 years in the film business, Connery has globalised and has reaped the rewards thereof. The Bond brand or franchise continues without him, but he helped to make it what it is. He remains the best Bond in my book and an icon in his home country and has helped others from Scotland to commercialise and promote themselves, particularly in the USA and used his influence to help those less fortunate. He made the most of his talent, pursued his vision, globalised, made mistakes, worked extremely hard and earned his place in the A-list.
Diamonds can be forever for those of us struggling to make our mark in business, with the right ambition, staying power and hard work. Just beware strange men bearing free gemstones – there is no such thing - they always come with responsibilities and consequences attached.
It was the first Bond film that I watched at the cinema, transfixed by the moon buggy and frustrated that I never owned the Corgi, or was it Dinky, version. I think too that it was the first screen violence I can remember witnessing, particularly the scene where Bond sends diamond smuggler Peter Franks to his death with the aid of a fire extinguisher. Brutal in the extreme, but I emerged suitably shaken, not stirred.
Childhood memories aside, I did not realise it at the time that this was Connery’s comeback to Bond, after the Lazenby interlude [not as wooden as given credit for], lured back with a $1 million fee and $10,000 a week wages. Quite a sum at the time, but infinitely more value than your average SPL or Premier League showman.
While not wishing to venture into ‘best Bond’ territory, it struck me that those of us in business in Scotland could take a page or two out of the book of Connery to guide us going forward.
First lesson, he started local, but built a global phenomenon. Starting from his milk delivery days in Fountainbridge, Connery pursued and ultimately realised his vision. It took him six years from his first film part to his breakthough in 1962’s Dr No. He accepted the small parts, dealt with the inevitable crap, but kept his eye on the prize. A lesson for all budding entrepreneurs!
Secondly, he grabbed the opportunity and ran with it. Bond might not have made him. He might not have been in the right place at the right time. We might have hated his interpretation. He played the legendary spy his way and it worked. That combination of clarity, sophistication, looks and ruthlessness won the fights, the girls and the audiences. While there may be something here for the entrepreneur to emulate, its more about the strength of character to move away from home turf and mix it with an alien culture, in this case Hollywood, and not be cowed or manipulated. Surely this must be a fantastic example of internationalisation.
Having made it to the big time and secured his cash cow, Connery then realised that there must be more to life. More product with which to grow his personal brand. He was not afraid to step off the Bond bandwagon and negotiate the maze of undoubted crazy offers and ridiculous roles. As David Thompson has put it, he has made strange film choices but he retained and retains public affection. Something brands aspire too. The lesson here being the need to accept failures as part of the baggage of ambitious business. Just keep the faith and the successes will come.
We then return to Diamonds are Forever. Our hero was not afraid to change his mind and take the money, and while this may have been death to brand Connery, in fact turned out a cracking performance in a cracking film. Opportunism is an oft underated trait. Although, the less said about Never Say Never Again, the better.
After 54 years in the film business, Connery has globalised and has reaped the rewards thereof. The Bond brand or franchise continues without him, but he helped to make it what it is. He remains the best Bond in my book and an icon in his home country and has helped others from Scotland to commercialise and promote themselves, particularly in the USA and used his influence to help those less fortunate. He made the most of his talent, pursued his vision, globalised, made mistakes, worked extremely hard and earned his place in the A-list.
Diamonds can be forever for those of us struggling to make our mark in business, with the right ambition, staying power and hard work. Just beware strange men bearing free gemstones – there is no such thing - they always come with responsibilities and consequences attached.
Wednesday 4 August 2010
Pablo Picasso and the budget deficit
A friend recently quoted a former boss as saying that ‘any problem is straightforward provided you find the right level of abstraction’, in other words, to get out of the doodoo you need to think laterally and view things differently.
Given that we have all been exhorted to come up with ideas for reducing the budget deficit I thought I would ‘abstract’ on the theme of public sector cuts and the ‘go green’ agenda. I will not address extra taxes on the private sector since beleaguered small businesses have suffered enough already and tax rises are not at all an abstract solution. My starting point will be the difficult choices required to maintain a sensible level of investment in emerging green technologies while meeting spending targets - think here of the debate around cuts to the Carbon Trust in order to help fund the proposed Green Investment Bank.
The recent announcement of cuts to support for low carbon and renewable energy technologies has received media attention, however, what about the spending on media and advertising to raise awareness of government initiatives? While the Carbon Trust is no stranger to full page adverts in quality periodicals, other parts of Government have traditionally funded large scale public information campaigns about issues such as healthy eating, healthy living or going green. Such campaigns are given life in order to convey a sense of Government purpose, however, will they survive the current economic malaise and will anyone notice?
If we accept reduced budgets for public information campaigns, rather than spend money doing the same thing in the same old way, here is the abstraction. Let’s say for example we have a smaller budget for a healthy eating campaign, why not divide it up and give it as grant aid to a selection of key food companies for them to market their own produce in their own way. By promoting their own products, the companies win, by spreading the policy message for less, the government wins and by spreading the creative work, the agencies win. Assuming that this could be done in a way that meets state aid rules, we end up with a win, win, win situation. The relevant Minister can still claim the credit, organise a photo-call and send out a rousing press release. Admittedly, because the money is distributed amongst a group of different companies, the results will vary, but the overall impact would be positive.
Consumer facing eco-campaigns are another case in point. Rather than put out generic ‘go green’ messages to the wider populace, targeted action on problems such as food waste backed up by the provision of the necessary collection infrastructure is surely more sensible. The delivery mechanism is Zero Waste Scotland working in conjunction with local authorities and private contractors.
The Climate Challenge Fund, for which local communities bid to initiate carbon reduction projects, is an interesting abstraction. This takes its lead from the people in villages, towns and cities throughout Scotland who have devised their own ways of reducing environmental impacts. A good example is the project from SPOKES, the Lothian cycling campaign, which aims to devise solutions to the storage of bicycles in Edinburgh tenements. On a related note, a Scottish village has recently employed a full time energy manager to advise residents on the optimum mix of energy efficiency and micro-renewable technologies. Abstracting this concept, perhaps 100 energy managers could be chosen and/or trained and assigned two villages each from the 200 that make the best case for it. Leaving aside the massive challenge of changing the way we generate electricity, getting 200 villages in Scotland to reduce energy demand would go a long way to helping the country meet its carbon policy targets. It could be enacted within a tighter budget regime, could employ some re-assigned civil servants and provide work for private sector energy efficiency and micro-generation providers.
This abstraction game is fascinating, although there is a danger that it creates opportunities for the management class to organise workshops and strategy sessions. Indeed, I was once accused of not having a plan by someone working in a large organisation, unlike them, who admitted to spending most of their working day discussing strategy. There must be a happy medium, so I call on policy makers, and indeed private sector strategists, to ditch their Powerpoint slides and get all Mark Rothko and Eduardo Paolozzi. If the body politic can think in the abstract it can meet its revised budget targets while improving governance and the lot of the governed. As long as we don’t end up with a load of Jackson Pollocks.
Given that we have all been exhorted to come up with ideas for reducing the budget deficit I thought I would ‘abstract’ on the theme of public sector cuts and the ‘go green’ agenda. I will not address extra taxes on the private sector since beleaguered small businesses have suffered enough already and tax rises are not at all an abstract solution. My starting point will be the difficult choices required to maintain a sensible level of investment in emerging green technologies while meeting spending targets - think here of the debate around cuts to the Carbon Trust in order to help fund the proposed Green Investment Bank.
The recent announcement of cuts to support for low carbon and renewable energy technologies has received media attention, however, what about the spending on media and advertising to raise awareness of government initiatives? While the Carbon Trust is no stranger to full page adverts in quality periodicals, other parts of Government have traditionally funded large scale public information campaigns about issues such as healthy eating, healthy living or going green. Such campaigns are given life in order to convey a sense of Government purpose, however, will they survive the current economic malaise and will anyone notice?
If we accept reduced budgets for public information campaigns, rather than spend money doing the same thing in the same old way, here is the abstraction. Let’s say for example we have a smaller budget for a healthy eating campaign, why not divide it up and give it as grant aid to a selection of key food companies for them to market their own produce in their own way. By promoting their own products, the companies win, by spreading the policy message for less, the government wins and by spreading the creative work, the agencies win. Assuming that this could be done in a way that meets state aid rules, we end up with a win, win, win situation. The relevant Minister can still claim the credit, organise a photo-call and send out a rousing press release. Admittedly, because the money is distributed amongst a group of different companies, the results will vary, but the overall impact would be positive.
Consumer facing eco-campaigns are another case in point. Rather than put out generic ‘go green’ messages to the wider populace, targeted action on problems such as food waste backed up by the provision of the necessary collection infrastructure is surely more sensible. The delivery mechanism is Zero Waste Scotland working in conjunction with local authorities and private contractors.
The Climate Challenge Fund, for which local communities bid to initiate carbon reduction projects, is an interesting abstraction. This takes its lead from the people in villages, towns and cities throughout Scotland who have devised their own ways of reducing environmental impacts. A good example is the project from SPOKES, the Lothian cycling campaign, which aims to devise solutions to the storage of bicycles in Edinburgh tenements. On a related note, a Scottish village has recently employed a full time energy manager to advise residents on the optimum mix of energy efficiency and micro-renewable technologies. Abstracting this concept, perhaps 100 energy managers could be chosen and/or trained and assigned two villages each from the 200 that make the best case for it. Leaving aside the massive challenge of changing the way we generate electricity, getting 200 villages in Scotland to reduce energy demand would go a long way to helping the country meet its carbon policy targets. It could be enacted within a tighter budget regime, could employ some re-assigned civil servants and provide work for private sector energy efficiency and micro-generation providers.
This abstraction game is fascinating, although there is a danger that it creates opportunities for the management class to organise workshops and strategy sessions. Indeed, I was once accused of not having a plan by someone working in a large organisation, unlike them, who admitted to spending most of their working day discussing strategy. There must be a happy medium, so I call on policy makers, and indeed private sector strategists, to ditch their Powerpoint slides and get all Mark Rothko and Eduardo Paolozzi. If the body politic can think in the abstract it can meet its revised budget targets while improving governance and the lot of the governed. As long as we don’t end up with a load of Jackson Pollocks.
Friday 21 May 2010
Well....
Before proceeding further, I would like to declare that I own a petrol driven car, have lots of plastic items around the house and use various chemicals in the home and the garden. While acknowledging my oil based dependency, am I alone in being appalled at the sight of a 98-tonne metal funnel being touted as the solution to one of the biggest environmental disasters of our time?
The explosion on the Transocean rig, operated on behalf of BP in the Gulf of Mexico is a personal and environmental disaster on its own merits but once again it raises questions over the long term sustainability of the oil industry and our associated dependence. While it is not the first oil based incident and will not be the last, given the frenzied arguments around ‘peak oil’ and the move towards a low carbon economy, the sight of the Heath-Robinson funnel speaks volumes about the state of the oil industry.
The event itself has exposed aspects of the commercial structure of the oil exploration sector, where the multinational behemoths no longer do the work but subcontract to the ‘services’ companies. In this case, we have a rig operated by Transocean with certain critical tasks undertaken by Halliburton, all under the auspices of a BP contract. Which is fine, up to a point, but as per the UK financial meltdown, when something goes wrong, everyone is left looking quizzically at everyone else. In this case, BP’s Chief Executive Tony Hayward has gone so far to say that BP was not at fault, even though it has promised to pick up the bill for the cleanup.
An inevitable enquiry will no doubt expose problems with systems and safety procedures, however, the fact that the best solution seems to be a large metal funnel seems somewhat inadequate, not to say pathetic. Given the technological advances made to seek out and extract oil and gas from the sea bed in massively hostile environments, there must be a lingering concern that the technology push has focussed too much on identifying reserves and a smooth extraction process, rather than multiple and sophisticated fail safe solutions and contingency procedures.
While views will vary on the significance of this event to BP’s long term prospects, immediate share price dips aside, the images of Tony Hayward looking and sounding like a man who is wondering what all the fuss is about, exemplifies a certain measure of big oil untouchability. Such a position is however misplaced, given the gradual move towards low and no carbon fuel sources and the fact that whichever way you look at it, the amount of oil that we extract from the earth is in a long term decline. The oil majors will of course argue that new reserves will be discovered and technology will make extraction economically feasible, however, their horizon extends no further than 30-40 years, if that. One does not need to think in geological terms to start pondering the need to expend significant time and effort now in order to eventually replace oil as a fuel, lubricant, intermediary and product constituent. This latest event has already caused many people to question the USA’s offshore drilling efforts, a policy largely driven by oil interests.
While restrictions in US offshore activity may be a lasting legacy of the tragedy in the Gulf of Mexico, it may also represent the chronological point at which the world started to create a road map for a post-oil economy. In Scotland, the offshore oil and gas sector has of course wrought significant economic benefits, particularly in and around Aberdeen and HM Treasury. We have all benefited through the North Sea dividend, created by many clever and brave individuals, but we now face the prospect of declining reserves in our own offshore waters. At the same time in Scotland, we are seeing a gradual commercial transition from oil and gas to offshore renewable in the form of wind, wave and tidal, at the same time the traditional oil and gas services companies have already internationalised and focussed on maintenance and decommissioning. While the low carbon transition in the North Sea may seem insignificant at the moment, I am reminded of an ITN Roving Report from 1962. The intrepid reporter joins the crew of a converted North Sea trawler using IIWW anti-submarine technology to map the sea bed for its oil bearing potential. On returning to land, our correspondent asks a Professor of Oceanography the immortal question: “Do you think that they will ever find oil in the North Sea?” What a lot has changed in fifty years, what a lot will change in the next fifty years.
The explosion on the Transocean rig, operated on behalf of BP in the Gulf of Mexico is a personal and environmental disaster on its own merits but once again it raises questions over the long term sustainability of the oil industry and our associated dependence. While it is not the first oil based incident and will not be the last, given the frenzied arguments around ‘peak oil’ and the move towards a low carbon economy, the sight of the Heath-Robinson funnel speaks volumes about the state of the oil industry.
The event itself has exposed aspects of the commercial structure of the oil exploration sector, where the multinational behemoths no longer do the work but subcontract to the ‘services’ companies. In this case, we have a rig operated by Transocean with certain critical tasks undertaken by Halliburton, all under the auspices of a BP contract. Which is fine, up to a point, but as per the UK financial meltdown, when something goes wrong, everyone is left looking quizzically at everyone else. In this case, BP’s Chief Executive Tony Hayward has gone so far to say that BP was not at fault, even though it has promised to pick up the bill for the cleanup.
An inevitable enquiry will no doubt expose problems with systems and safety procedures, however, the fact that the best solution seems to be a large metal funnel seems somewhat inadequate, not to say pathetic. Given the technological advances made to seek out and extract oil and gas from the sea bed in massively hostile environments, there must be a lingering concern that the technology push has focussed too much on identifying reserves and a smooth extraction process, rather than multiple and sophisticated fail safe solutions and contingency procedures.
While views will vary on the significance of this event to BP’s long term prospects, immediate share price dips aside, the images of Tony Hayward looking and sounding like a man who is wondering what all the fuss is about, exemplifies a certain measure of big oil untouchability. Such a position is however misplaced, given the gradual move towards low and no carbon fuel sources and the fact that whichever way you look at it, the amount of oil that we extract from the earth is in a long term decline. The oil majors will of course argue that new reserves will be discovered and technology will make extraction economically feasible, however, their horizon extends no further than 30-40 years, if that. One does not need to think in geological terms to start pondering the need to expend significant time and effort now in order to eventually replace oil as a fuel, lubricant, intermediary and product constituent. This latest event has already caused many people to question the USA’s offshore drilling efforts, a policy largely driven by oil interests.
While restrictions in US offshore activity may be a lasting legacy of the tragedy in the Gulf of Mexico, it may also represent the chronological point at which the world started to create a road map for a post-oil economy. In Scotland, the offshore oil and gas sector has of course wrought significant economic benefits, particularly in and around Aberdeen and HM Treasury. We have all benefited through the North Sea dividend, created by many clever and brave individuals, but we now face the prospect of declining reserves in our own offshore waters. At the same time in Scotland, we are seeing a gradual commercial transition from oil and gas to offshore renewable in the form of wind, wave and tidal, at the same time the traditional oil and gas services companies have already internationalised and focussed on maintenance and decommissioning. While the low carbon transition in the North Sea may seem insignificant at the moment, I am reminded of an ITN Roving Report from 1962. The intrepid reporter joins the crew of a converted North Sea trawler using IIWW anti-submarine technology to map the sea bed for its oil bearing potential. On returning to land, our correspondent asks a Professor of Oceanography the immortal question: “Do you think that they will ever find oil in the North Sea?” What a lot has changed in fifty years, what a lot will change in the next fifty years.
Monday 29 March 2010
Sustainability reporting is not just for the big boys
For some years now, larger companies have been churning out annual reports describing their corporate responsibility (CR) or sustainability record. While these reports have become more sophisticated, they try in many ways to please everyone and often please very few.
At the same time, there is a growing band of smaller companies which have embraced regular reporting as a means of driving process improvement. These companies will take different approaches to environmental management and working conditions, but they share a desire to improve their relationship with the environment, suppliers, local communities and employees. This work is partly driven by legislation, but is also a means of responding to questions from customers and saving money, for example through reduced waste disposal, energy and recruitment costs.
Why make progress or problems with sustainability public? Firstly, the report can be a mechanism for setting targets and driving the resulting process improvements – you cannot beat a public statement of intent to concentrate minds! The report can sit easily alongside an existing data and management system and should offer a full and frank picture, even where progress is not being made. Secondly, the company may well be getting enquiries from potential customers, investors and employees about its sustainability record. Thirdly, greater transparency is a facet of improved management, which in turn enhances the value of the company brand.
The rise of digital communication means that even small businesses can produce concise, engaging and up to date summaries of environmental and sustainability performance. While a printed summary will always be necessary, online reports can be much more flexible, visual and up to date. In addition, the work of those within the business can be brought to life, specific projects can be illustrated and targets updated.
The report need not emulate the thick tomes produced by larger companies. It should describe the nature of the business, associated policies and how the company is tackling its key ‘impacts’ such as waste, water, responsible sourcing, employee development or community involvement. The report may also be structured in line with external voluntary guidelines.
In the era of business transparency and scrutiny, those companies that are prepared to expose their management of environmental, ethical, social and community issues will undoubtedly enhance their bottom-line and their value.
At the same time, there is a growing band of smaller companies which have embraced regular reporting as a means of driving process improvement. These companies will take different approaches to environmental management and working conditions, but they share a desire to improve their relationship with the environment, suppliers, local communities and employees. This work is partly driven by legislation, but is also a means of responding to questions from customers and saving money, for example through reduced waste disposal, energy and recruitment costs.
Why make progress or problems with sustainability public? Firstly, the report can be a mechanism for setting targets and driving the resulting process improvements – you cannot beat a public statement of intent to concentrate minds! The report can sit easily alongside an existing data and management system and should offer a full and frank picture, even where progress is not being made. Secondly, the company may well be getting enquiries from potential customers, investors and employees about its sustainability record. Thirdly, greater transparency is a facet of improved management, which in turn enhances the value of the company brand.
The rise of digital communication means that even small businesses can produce concise, engaging and up to date summaries of environmental and sustainability performance. While a printed summary will always be necessary, online reports can be much more flexible, visual and up to date. In addition, the work of those within the business can be brought to life, specific projects can be illustrated and targets updated.
The report need not emulate the thick tomes produced by larger companies. It should describe the nature of the business, associated policies and how the company is tackling its key ‘impacts’ such as waste, water, responsible sourcing, employee development or community involvement. The report may also be structured in line with external voluntary guidelines.
In the era of business transparency and scrutiny, those companies that are prepared to expose their management of environmental, ethical, social and community issues will undoubtedly enhance their bottom-line and their value.
Tuesday 23 March 2010
Common Sense Really
In the current economic climate, it might seem somewhat irrelevant to be talking about corporate social responsibility or CSR. But, while corporate heads have been turned towards market turmoil, the resulting mangling of corporate governance and death of long standing companies, makes it a fitting time to re-visit the concept of CSR and its relevance to a profit making enterprise.
Firstly, the acronym. It’s all wrong. While businesses can be social enterprises, most are not. So let us rescue the concept and call it ‘common sense really’, ‘enlightened self interest’ or indeed, good old fashioned ‘corporate governance’. Let us also accept that a company that is financially successful over a long period is, by dint of this success, a company that is corporately responsible in relation to people and the environment. See Adam Smith for details.
It seems sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. There is also a strong reputational aspect to this and, particularly for public companies, there is a relationship to share price.
Having taken a stab at a definition, it’s worth mulling over the question of who drives the CSR agenda. Like all good concepts there is no simple answer. Orthodoxy says that CSR should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the CSR industry. Here perhaps, and this is admittedly a cynical view, the agenda is less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, CSR also comes with its own mountain of written material, created by companies, academics, commentators or CSR professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about CSR need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
We have gone this far and not even mentioned carbon and climate change. Is the latter the same as CSR? Of course not, even given the strong focus on the carbon impacts of commercial enterprise. Briefly, abundant evidence exists that climate change will shape the business environment, which in turn will shape CSR. End of story.
So where does that leave us? CSR – it’s a piece of cake, or should it be POC, for an innovative, well run company with long term growth ambitions. Those of us for whom this simple goal is not as easy as falling off a log (or FoaL) also need a little bit of a steer. Above all, companies must not lose sight of the fact that they are there to create value for their shareholders, employees and customers, retaining a focus on profit, performance and governance.
While this is all well and good, how do investors best take a view on CSR when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even listed corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with environmental, social and governance risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to CSR related issues. Put simply, investors need to be more engaged and clued up, while investees need to recognise the importance of ESG risks as both management and communications challenges.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. Those that do not will die. It’s common sense really.
Firstly, the acronym. It’s all wrong. While businesses can be social enterprises, most are not. So let us rescue the concept and call it ‘common sense really’, ‘enlightened self interest’ or indeed, good old fashioned ‘corporate governance’. Let us also accept that a company that is financially successful over a long period is, by dint of this success, a company that is corporately responsible in relation to people and the environment. See Adam Smith for details.
It seems sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. There is also a strong reputational aspect to this and, particularly for public companies, there is a relationship to share price.
Having taken a stab at a definition, it’s worth mulling over the question of who drives the CSR agenda. Like all good concepts there is no simple answer. Orthodoxy says that CSR should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the CSR industry. Here perhaps, and this is admittedly a cynical view, the agenda is less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, CSR also comes with its own mountain of written material, created by companies, academics, commentators or CSR professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about CSR need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
We have gone this far and not even mentioned carbon and climate change. Is the latter the same as CSR? Of course not, even given the strong focus on the carbon impacts of commercial enterprise. Briefly, abundant evidence exists that climate change will shape the business environment, which in turn will shape CSR. End of story.
So where does that leave us? CSR – it’s a piece of cake, or should it be POC, for an innovative, well run company with long term growth ambitions. Those of us for whom this simple goal is not as easy as falling off a log (or FoaL) also need a little bit of a steer. Above all, companies must not lose sight of the fact that they are there to create value for their shareholders, employees and customers, retaining a focus on profit, performance and governance.
While this is all well and good, how do investors best take a view on CSR when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even listed corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with environmental, social and governance risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to CSR related issues. Put simply, investors need to be more engaged and clued up, while investees need to recognise the importance of ESG risks as both management and communications challenges.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. Those that do not will die. It’s common sense really.
Naked Ambition
Market turmoil and consolidation has led to further questions about the ability of Scottish-based companies to grow to global prominence. Being the acquirer not the acquired.
There is much debate over the ambition of Scottish companies and how this is tempered by banks, investors and professional advisers. While accepting that only a tiny percentage of start-ups will go on to achieve significant growth [20% or less], those companies with a drive to expand, may have their wings clipped unnecessarily by those that fund and advise. Take the fundraising experience of a small but ambitious Scottish consumer products company. It was already heading for 50% turnover from international sales and was therefore surprised to hear some investors ask ‘why are you bothering to export’. This despite the company’s stated ambition to be the market leader globally. While familiar with the oft quoted mantra of ‘sort out your home territory first before embarking on any international adventures’, this particular company was already the UK market leader while freely acknowledging that it could do more on its doorstep. Crucially however, its customer base was present in every country in the world and the company had already targeted those territories with the most promise [and in fact was already exporting to 20 such countries across North America, Europe, Asia and Australasia]. The distinct impression given was one in which venturing outside Scotland and the UK was too risky and scary. As it was the company raised its finance on the premise of continued export growth. Indeed, if the Directors had acquiesced and retrenched their export activity, the company would now be dead, given the state of the UK economy. While accepting that exporting is difficult and expensive, the lesson here is that it should not form a barrier to growth and expansion.
As well as scale, there are debates over the nature and type of growth. Having an international outlook is one thing, but defining where the boundaries of growth lie is also something to consider. This brings in the nature of an exit for the founders of the company. Discussions about the nature of company growth and exit, normally boil down to either a strategy of ‘build it up then sell to another company’ or ‘build it up and go for an initial public offering’. There can be a reticence to go for the latter option and even if this path is chosen, it may be because other sources of funding have dried up. Do investors and advisors steer companies away from an IPO because their influence and control is diluted? Is an IPO portrayed as being too difficult? Thankfully, such arguments have clearly not deterred some notably successful Scottish companies from taking this route to growth and vastly expanding their investor base.
Whether a company remains private or opts for the public markets, we still return to the question of ambition for the company and those involved. Clearly at some point in the future, the company may well go bust or be bought by someone else, however, in the meantime how big should and could the company get. If the basic offering is a suitable platform for growth there is absolutely no reason why a founder of Scottish start-up could not create a multinational behemoth that devours other companies and operates globally and swims within the public markets. This may mean raising huge amounts of money through private or public placements, but so be it, if the god of ambition is to be assuaged. It has been done by drinks, transport, engineering, financial and energy companies, although with a few notable exceptions, the Scottish technology sector has lagged.
Regardless of the sector, business is of course inherently risky and founders will face a multitude of challenges, particularly in the very stages of turning an idea into a commercial reality. Leaving aside grant funding, the private investment route is now even more important for Scottish start-ups, given that the banks are pulling back from those who are not cash positive. So when faced with revised risk models and investor scepticism, company founders can do worse than start from a position of naked global ambition, which will at least provide a standard around which those involved can rally.
So, how best to proceed for the putative Scottish multinational. Ignore turmoil in the banks – their corporate governance was shot to pieces so they have taken their ball back, for the moment. Question investors and advisors capabilities, particularly those who baulk at an export strategy and portray a quick trade sale as the only option. Close ears to a perceived lack of confidence – remember the Empire of the Scots! It would be a shame if new and ambitious Scottish companies allowed themselves to be cowed by the baggage of others. Go on you thrusting entrepreneurs, be ambitious, be avaricious, be multinational – think behemoth!
There is much debate over the ambition of Scottish companies and how this is tempered by banks, investors and professional advisers. While accepting that only a tiny percentage of start-ups will go on to achieve significant growth [20% or less], those companies with a drive to expand, may have their wings clipped unnecessarily by those that fund and advise. Take the fundraising experience of a small but ambitious Scottish consumer products company. It was already heading for 50% turnover from international sales and was therefore surprised to hear some investors ask ‘why are you bothering to export’. This despite the company’s stated ambition to be the market leader globally. While familiar with the oft quoted mantra of ‘sort out your home territory first before embarking on any international adventures’, this particular company was already the UK market leader while freely acknowledging that it could do more on its doorstep. Crucially however, its customer base was present in every country in the world and the company had already targeted those territories with the most promise [and in fact was already exporting to 20 such countries across North America, Europe, Asia and Australasia]. The distinct impression given was one in which venturing outside Scotland and the UK was too risky and scary. As it was the company raised its finance on the premise of continued export growth. Indeed, if the Directors had acquiesced and retrenched their export activity, the company would now be dead, given the state of the UK economy. While accepting that exporting is difficult and expensive, the lesson here is that it should not form a barrier to growth and expansion.
As well as scale, there are debates over the nature and type of growth. Having an international outlook is one thing, but defining where the boundaries of growth lie is also something to consider. This brings in the nature of an exit for the founders of the company. Discussions about the nature of company growth and exit, normally boil down to either a strategy of ‘build it up then sell to another company’ or ‘build it up and go for an initial public offering’. There can be a reticence to go for the latter option and even if this path is chosen, it may be because other sources of funding have dried up. Do investors and advisors steer companies away from an IPO because their influence and control is diluted? Is an IPO portrayed as being too difficult? Thankfully, such arguments have clearly not deterred some notably successful Scottish companies from taking this route to growth and vastly expanding their investor base.
Whether a company remains private or opts for the public markets, we still return to the question of ambition for the company and those involved. Clearly at some point in the future, the company may well go bust or be bought by someone else, however, in the meantime how big should and could the company get. If the basic offering is a suitable platform for growth there is absolutely no reason why a founder of Scottish start-up could not create a multinational behemoth that devours other companies and operates globally and swims within the public markets. This may mean raising huge amounts of money through private or public placements, but so be it, if the god of ambition is to be assuaged. It has been done by drinks, transport, engineering, financial and energy companies, although with a few notable exceptions, the Scottish technology sector has lagged.
Regardless of the sector, business is of course inherently risky and founders will face a multitude of challenges, particularly in the very stages of turning an idea into a commercial reality. Leaving aside grant funding, the private investment route is now even more important for Scottish start-ups, given that the banks are pulling back from those who are not cash positive. So when faced with revised risk models and investor scepticism, company founders can do worse than start from a position of naked global ambition, which will at least provide a standard around which those involved can rally.
So, how best to proceed for the putative Scottish multinational. Ignore turmoil in the banks – their corporate governance was shot to pieces so they have taken their ball back, for the moment. Question investors and advisors capabilities, particularly those who baulk at an export strategy and portray a quick trade sale as the only option. Close ears to a perceived lack of confidence – remember the Empire of the Scots! It would be a shame if new and ambitious Scottish companies allowed themselves to be cowed by the baggage of others. Go on you thrusting entrepreneurs, be ambitious, be avaricious, be multinational – think behemoth!
Friday 5 March 2010
Essential Strategy for Growth
In the current economic climate, it might seem somewhat irrelevant to be talking about environmental, social and governance (ESG) issues. But, while corporate heads have been turned towards market turmoil, the resulting mangling of corporate governance and death of long standing companies, makes it a fitting time to take a fresh look at what makes a company, large or small, fit for long term purpose and investment.
The links, or not, between a sound approach to ESG risk and commercial success have been argued over for some time. However, the current market environment raises some interesting questions around both sides of the argument. On the one hand, let us consider Northern Rock or RBS. Both are long standing companies, the former with its roots in the mid-19th Century industrialising north of England, the latter founded in Edinburgh in 1727. Both were taken in a certain direction within the past five years by purposeful chief executives. Both washed up on the shores of the wholesale money markets. Conclusion – failure of corporate governance in questioning the strategy of ambitious and forceful CEOs.
On the other hand, both had good records in relation to environmental management and community engagement. Northern Rock operated its foundation, that was a key player in social support within its north-east England heartland. RBS played the ball on climate change and had signed up to the Equator Principles, produced an annual sustainability report and ticked many of these boxes. Conclusion – there remains a disjuncture between measures of environmental and community engagement and actual company performance.
It does however seem sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. Both Northern Rock and RBS adopted overly ambitious growth strategies, allied to a short term viewpoint that was not adequately questioned by the board and investors. As long as the share price grew – who really questioned the longer-term consequences?
Returning to ESG risk, it’s worth mulling over the question of who drives this agenda. Orthodoxy says that a sound approach to these issues should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the ESG industry. Here perhaps, and this is admittedly a cynical view, the agenda can be less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, ESG performance also comes with its own mountain of written material, created by companies, academics, commentators or ESG professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about ESG risk need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
So where does that leave us? Can and should boards, regulators and investors take ESG risk more seriously? While our economic system dictates that companies must retain a focus on financial performance, given recent events, there is no doubt that ESG issues must take more prominence in corporate risk profiling.
The question then arises as to how investors best take a view on ESG risk when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available and can be very useful, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with ESG risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to these issues. Put simply, investors need to be more engaged and clued up, while investees need to take ESG risk more seriously and recognise its importance as both a management and communications challenge.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. They will demonstrate an Effective Strategy for Growth.
The links, or not, between a sound approach to ESG risk and commercial success have been argued over for some time. However, the current market environment raises some interesting questions around both sides of the argument. On the one hand, let us consider Northern Rock or RBS. Both are long standing companies, the former with its roots in the mid-19th Century industrialising north of England, the latter founded in Edinburgh in 1727. Both were taken in a certain direction within the past five years by purposeful chief executives. Both washed up on the shores of the wholesale money markets. Conclusion – failure of corporate governance in questioning the strategy of ambitious and forceful CEOs.
On the other hand, both had good records in relation to environmental management and community engagement. Northern Rock operated its foundation, that was a key player in social support within its north-east England heartland. RBS played the ball on climate change and had signed up to the Equator Principles, produced an annual sustainability report and ticked many of these boxes. Conclusion – there remains a disjuncture between measures of environmental and community engagement and actual company performance.
It does however seem sensible to believe that commercial longevity is more likely to be achieved by those companies that innovate, that are sensitive to the needs of their employees, customers and suppliers, that manage and mitigate their impacts on the environment and whose systems are efficient and effective, that are not afraid of making hard decisions based on a long term view, that enjoy what they do and bring stakeholders along with them. Both Northern Rock and RBS adopted overly ambitious growth strategies, allied to a short term viewpoint that was not adequately questioned by the board and investors. As long as the share price grew – who really questioned the longer-term consequences?
Returning to ESG risk, it’s worth mulling over the question of who drives this agenda. Orthodoxy says that a sound approach to these issues should be embedded within the values of the business and driven from the top. In reality there will be all manner of prods and pressure from customers, peers, regulators, investors, local communities, as well as the management team and, yes, even the CEO. Then we have the activists, non-governmental organisations and elements of the ESG industry. Here perhaps, and this is admittedly a cynical view, the agenda can be less about accountability but more about an aversion to profit and the abhorrent pursuit thereof. Let’s whip the fat cats in their pinstripes and make them atone for their wicked ways!
Being a trendy concept, ESG performance also comes with its own mountain of written material, created by companies, academics, commentators or ESG professionals. Too much of this material can be inappropriate, boring, turgid and seemingly created to satisfy a generic audience that does not actually exist (hence no-one reads, listens or watches). This has a particular relevance in a world where communication channels are globalising and multiplying and ‘audiences’ are disaggregating. While the media and communications paradigm shifts, those wishing to say something about ESG risk need to work that much harder to make their information coherent, relevant and interesting, ensuring that it engages and is tailored for different channels and different recipients.
So where does that leave us? Can and should boards, regulators and investors take ESG risk more seriously? While our economic system dictates that companies must retain a focus on financial performance, given recent events, there is no doubt that ESG issues must take more prominence in corporate risk profiling.
The question then arises as to how investors best take a view on ESG risk when there is no official ‘standard’ against which companies can be measured. The Global Reporting Initiative is useful, but for many companies, even corporates, getting to grips with all of its tenets is a mammoth task. The resulting outputs can also offer a major interpretive challenge, even to fund managers. Third party tools and services are available and can be very useful, but again, they define their own criteria and assessment structures.
Clearly the level of due diligence will vary amongst investors and some will be more engaged with ESG risks than others. At the same time, the investee companies, and this returns to a point already raised, could help themselves through better, clearer information provision in relation to these issues. Put simply, investors need to be more engaged and clued up, while investees need to take ESG risk more seriously and recognise its importance as both a management and communications challenge.
In conclusion; when looking to a globally warmed future, the successful companies will innovate, take a long-term view, manage risk, pursue strong governance and effectively communicate. They will demonstrate an Effective Strategy for Growth.
Renewable Scotland
Can renewable energy lead Scotland out of recession? Can Scotland reap significant benefit from the move to a low carbon economy? These are questions posed on a daily basis by those working within, or interacting with, the renewable energy industry. Those firmly in the renewables camp support the view and point to the job creation, infrastructure and environmental dividend. Others caution against over-optimistic forecasts and throw in caveats about investment, planning system change, grid access, the need for nuclear, clean coal and carbon capture and storage and the importance of energy efficiency, heat supply and demand.
Running through this debate, there is the mantra in Scotland that ‘we missed the boat on wind, but we cannot afford to miss the boat on marine energy’.
In relation to Scotland, the following observations may be useful:
Glass half empty syndrome can obscure the great progress made in the last few years and the fact that the global economy is inevitably moving in favour of clean energy. Let us cheer for the fact that Scotland is home to leading utilities with significant renewable energy portfolios; Scotland has seen massive growth in the number of onshore wind projects; a Scottish company created the world’s first commercial wave power device; Scotland is home to the European Marine Energy Centre and bags of emerging technologies; Scotland may also play host to an equivalent research focus for offshore wind-power; Scotland is home to a vibrant collection of micro-generation and energy efficiency companies and technologists; Scotland thus far has demonstrated a political will to counter climate change and encourage renewables; the revised planning framework is relatively benign; the Saltire Prize has created a bit of a stir internationally and Scotland does have a track record of squeezing out entrepreneurs and innovators.
Some within the investment and media communities are not fully accepting that they are dealing with a ‘sector’. While massive strides have been made in recent years, there remains a feeling that ‘renewables’ is still never going to be as big as oil and gas, therefore cannot be viewed as the main and most crucial solution to increased energy demand along with reduced environmental impact. The sector therefore needs to work hard to convince others that it is crucial, viable and a significant economic force.
The renewables ‘sector’ is not unique because of its environmental positives. As a business sector, like others, there are big players, medium players and small players. Those at the big end will try and buy growth and those starting out will try and become bigger, killing off their competitors and eventually growing through acquisition before, probably, being eaten by one of the very big companies. It is the natural way of things. Renewables companies do not have a divine right to exist because they nominally reduce carbon in the atmosphere. Renewables operations only exist within the big utilities because the ROI stacks up.
While government investment is important, as is a fit for purpose grid network, renewable energy companies in Scotland need to fight for investment, attention and influence like everyone else, in every other sector. They need to be out there, actively assessing the market conditions, shaping their offering, constantly innovating, changing the business models (in line with a changing investment environment), taking more responsibility for their own communication and supporting their trade bodies. Thinking beyond the home market should also be part of any such company’s strategy discussions.
Part of any market assessment, must include a view on the framework that will emerge from the intergovernmental meetings in Copenhagen in December. A framework for truly international carbon pricing and exchange will fundamentally impact upon the economics of renewable and environmental technologies.
The role for small-scale renewable energy generation, allied to local use/efficiency systems is not given the attention it deserves. If civic society applied itself to this approach, it could potentially be the main solution to the problem - meeting higher energy demand while reducing carbon output. This perhaps jars with the ‘big’ centralised renewable energy producers and technologies, but they shouldn’t shy away from energy efficiency and localised generation – the economics will move in its favour.
Lets also not forget a related sector, that of ‘environmental’ technologies and services, in other words those companies that reduce and recycle waste, conserve and clean water, monitor and reduce air pollution and clean up contaminated land, to name but a few. Lump these together with renewables and you have a sizeable, growing and yes, important, economic machine.
Ultimately, Scotland does have an economic opportunity with larger scale renewables [be they on or offshore], smart grid technology, energy efficiency innovation, smaller scale, de-centralised energy creation, environmental technologies and services. The opportunity will be realised despite government decisions and/or powerlessness, despite investment challenges and despite competing interests. Yes of course, significant government funding, streamlining of the planning system and greater grid availability and flexibility can and will make a significant difference. However such action will not hide poor business models, poor technologies and loose control and it remains incumbent upon management teams to rise above, slide under, plot their way round and talk their way through the obstacles. There will be others that do not manage to reach stable commercial growth and will be swallowed early or die off. In a market economy, albeit one more restrained, it will be the native cunning of renewable energy and environmental entrepreneurs and corporate beasts that will dictate if the carbon dividend is realised in Scotland.
Running through this debate, there is the mantra in Scotland that ‘we missed the boat on wind, but we cannot afford to miss the boat on marine energy’.
In relation to Scotland, the following observations may be useful:
Glass half empty syndrome can obscure the great progress made in the last few years and the fact that the global economy is inevitably moving in favour of clean energy. Let us cheer for the fact that Scotland is home to leading utilities with significant renewable energy portfolios; Scotland has seen massive growth in the number of onshore wind projects; a Scottish company created the world’s first commercial wave power device; Scotland is home to the European Marine Energy Centre and bags of emerging technologies; Scotland may also play host to an equivalent research focus for offshore wind-power; Scotland is home to a vibrant collection of micro-generation and energy efficiency companies and technologists; Scotland thus far has demonstrated a political will to counter climate change and encourage renewables; the revised planning framework is relatively benign; the Saltire Prize has created a bit of a stir internationally and Scotland does have a track record of squeezing out entrepreneurs and innovators.
Some within the investment and media communities are not fully accepting that they are dealing with a ‘sector’. While massive strides have been made in recent years, there remains a feeling that ‘renewables’ is still never going to be as big as oil and gas, therefore cannot be viewed as the main and most crucial solution to increased energy demand along with reduced environmental impact. The sector therefore needs to work hard to convince others that it is crucial, viable and a significant economic force.
The renewables ‘sector’ is not unique because of its environmental positives. As a business sector, like others, there are big players, medium players and small players. Those at the big end will try and buy growth and those starting out will try and become bigger, killing off their competitors and eventually growing through acquisition before, probably, being eaten by one of the very big companies. It is the natural way of things. Renewables companies do not have a divine right to exist because they nominally reduce carbon in the atmosphere. Renewables operations only exist within the big utilities because the ROI stacks up.
While government investment is important, as is a fit for purpose grid network, renewable energy companies in Scotland need to fight for investment, attention and influence like everyone else, in every other sector. They need to be out there, actively assessing the market conditions, shaping their offering, constantly innovating, changing the business models (in line with a changing investment environment), taking more responsibility for their own communication and supporting their trade bodies. Thinking beyond the home market should also be part of any such company’s strategy discussions.
Part of any market assessment, must include a view on the framework that will emerge from the intergovernmental meetings in Copenhagen in December. A framework for truly international carbon pricing and exchange will fundamentally impact upon the economics of renewable and environmental technologies.
The role for small-scale renewable energy generation, allied to local use/efficiency systems is not given the attention it deserves. If civic society applied itself to this approach, it could potentially be the main solution to the problem - meeting higher energy demand while reducing carbon output. This perhaps jars with the ‘big’ centralised renewable energy producers and technologies, but they shouldn’t shy away from energy efficiency and localised generation – the economics will move in its favour.
Lets also not forget a related sector, that of ‘environmental’ technologies and services, in other words those companies that reduce and recycle waste, conserve and clean water, monitor and reduce air pollution and clean up contaminated land, to name but a few. Lump these together with renewables and you have a sizeable, growing and yes, important, economic machine.
Ultimately, Scotland does have an economic opportunity with larger scale renewables [be they on or offshore], smart grid technology, energy efficiency innovation, smaller scale, de-centralised energy creation, environmental technologies and services. The opportunity will be realised despite government decisions and/or powerlessness, despite investment challenges and despite competing interests. Yes of course, significant government funding, streamlining of the planning system and greater grid availability and flexibility can and will make a significant difference. However such action will not hide poor business models, poor technologies and loose control and it remains incumbent upon management teams to rise above, slide under, plot their way round and talk their way through the obstacles. There will be others that do not manage to reach stable commercial growth and will be swallowed early or die off. In a market economy, albeit one more restrained, it will be the native cunning of renewable energy and environmental entrepreneurs and corporate beasts that will dictate if the carbon dividend is realised in Scotland.
Thursday 25 February 2010
Eco-Workshop Syndrome
Having had the good fortune to work in environmental management for some 20 years, it is pleasing to see the recent unprecedented levels of interest shown in sustainability. Driven largely by concerns over man-made warming of the atmosphere, rising waste and consumption levels and problems with water supplies, ‘eco’ has become a serious business issue rather than a minority sport. A measure of this is the value of businesses that operate in the environmental and energy efficiency sectors – waste management, recycling, pollution and energy monitoring, strategy, associated software development and other consultancy – which is estimated to be worth £107 billion per annum in the UK alone. The old adage, ‘Where there’s muck, there’s brass’ holds as true now as it ever has. However, what we also now see, along with the growth of legitimate environmental businesses is the inevitable burgeoning of eco-philosophy strategising that is too often purchased at great expense by multinationals and big public sector agencies looking for ways to be more sustainable and responsible. In the main, such offerings tend to preach to the converted, alienate those who could be persuaded otherwise and are an expensive waste of money.
A plethora of projects and ‘programmes’ designed to change attitudes to sustainability, reflect on our feelings towards the environment, measure our responses to climate change are packed full of emotion and big words but end up gathering dust on a shelf or sitting idle on a hard disk. While such initiatives can be from consultancies, NGOs or both, they can often carry a whiff of anti-capitalism and anti-business. A measure of this is the time taken before advertising is identified as the main driver of mindless consumerism and therefore the cause of society’s ills [which in the case of the banking sector is a deserved epithet]. To return to the creative community, an advert for underarm deodorant may be cited, until it is pointed out that everyone in the room buys and uses such personal hygiene kit. Perhaps a more questionable use of advertising is government campaigns that cheerily or chillingly tell us to ‘go green’. At least adverts for consumer products are, in the main, well targeted and engaging. I challenge any agency with an eco-brief to come up with something that is accurate, amusing and memorable to its audience. Otherwise, that money could be better spent putting a proper cycling infrastructure into our major cities.
Businesses do use resources and create waste, however, they act responsibly in the main and certain businesses are creating the means and technologies through which our natural environment is protected. Such environmental ‘sector’ businesses attract honest- to- goodness engineers, planners, marketers, technologists, biologists, chemists and many other legitimate practitioners. While all such experts have their own lingua franca, impenetrable to those on the outside, at least it is honest technical terminology. Not the impenetrable consultancy speak that eco-strategy programmes deliver through outreach and workshops.
Talking of which, Alexei Sayle had strong views on those whom are not involved in light engineering, but whom regularly attend workshops. If you do go to a workshop and you ARE involved in light engineering, you are not only excused, but you are a rare beast indeed [in the UK at least]. If you are NOT involved in light engineering, and you regularly attend workshops, you are the sum of too many Twitters.
As we continue to fight the challenges of climate change, decimation of bio-diversity and resource depletion, there is a pressing need for more straight-talking, backed up by common sense, knowledge and observation from those with the ability to communicate and influence. People such as David Attenborough and John Lister-Kaye for example. They have done more to inform us about the environment than any number of summer schools, workshops and ‘thought leadership’ programmes. James Cameron’s Avatar must also be credited for its straightforward message about the benefits of living in balance with the natural world.
So come on all you plain speakers with an interest in progressive environmental management and sustainability. Let’s hear your honest, knowledgeable and engaging rhetoric. Let’s filter out the overblown strategising and get everyone rolling up their sleeves to improve the environment for one and all.
A plethora of projects and ‘programmes’ designed to change attitudes to sustainability, reflect on our feelings towards the environment, measure our responses to climate change are packed full of emotion and big words but end up gathering dust on a shelf or sitting idle on a hard disk. While such initiatives can be from consultancies, NGOs or both, they can often carry a whiff of anti-capitalism and anti-business. A measure of this is the time taken before advertising is identified as the main driver of mindless consumerism and therefore the cause of society’s ills [which in the case of the banking sector is a deserved epithet]. To return to the creative community, an advert for underarm deodorant may be cited, until it is pointed out that everyone in the room buys and uses such personal hygiene kit. Perhaps a more questionable use of advertising is government campaigns that cheerily or chillingly tell us to ‘go green’. At least adverts for consumer products are, in the main, well targeted and engaging. I challenge any agency with an eco-brief to come up with something that is accurate, amusing and memorable to its audience. Otherwise, that money could be better spent putting a proper cycling infrastructure into our major cities.
Businesses do use resources and create waste, however, they act responsibly in the main and certain businesses are creating the means and technologies through which our natural environment is protected. Such environmental ‘sector’ businesses attract honest- to- goodness engineers, planners, marketers, technologists, biologists, chemists and many other legitimate practitioners. While all such experts have their own lingua franca, impenetrable to those on the outside, at least it is honest technical terminology. Not the impenetrable consultancy speak that eco-strategy programmes deliver through outreach and workshops.
Talking of which, Alexei Sayle had strong views on those whom are not involved in light engineering, but whom regularly attend workshops. If you do go to a workshop and you ARE involved in light engineering, you are not only excused, but you are a rare beast indeed [in the UK at least]. If you are NOT involved in light engineering, and you regularly attend workshops, you are the sum of too many Twitters.
As we continue to fight the challenges of climate change, decimation of bio-diversity and resource depletion, there is a pressing need for more straight-talking, backed up by common sense, knowledge and observation from those with the ability to communicate and influence. People such as David Attenborough and John Lister-Kaye for example. They have done more to inform us about the environment than any number of summer schools, workshops and ‘thought leadership’ programmes. James Cameron’s Avatar must also be credited for its straightforward message about the benefits of living in balance with the natural world.
So come on all you plain speakers with an interest in progressive environmental management and sustainability. Let’s hear your honest, knowledgeable and engaging rhetoric. Let’s filter out the overblown strategising and get everyone rolling up their sleeves to improve the environment for one and all.
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