Companies that embrace new business models that push beyond 'defensive' actions to future-proof operations will be the next generation of sustainability leaders, British businessman Sir Ian Cheshire has said.
Speaking at a Business in the Community (BITC) event as part of Responsible Business Week, the executive member of Debenhams and new Barclays chairman called on firms to show more courage and make ambitious commitments that they don’t yet have answers for in order to be at the forefront of the low-carbon transition.
“You have to assume that [the low-carbon transition] is an opportunity,” Cheshire said. “It’s going to happen to you anyway, so you should frame it as an opportunity. If you don’t figure out how to be one of the winners, I can predict, quite confidently, that you’ll be one of the losers.
“This can’t just be about future-proofing businesses because that is slightly defensive, the point is to be a future winner, and the opportunities for those who figure this out are huge. But it takes the courage to look into what your business might be, compared to what it is now. Ultimately, this is about leadership.”
Cheshire, who stepped down as chief executive of home improvement retailer Kingfisher in 2014, said that companies are currently faced with "the Kodak challenge", alluding to the failure of the American camera company to “destroy” its existing business model when the market was showing signs of transformational change.
The new Barclays chair called on companies to "cannibalise" themselves to introduce new business models fit for a low-carbon, resource-efficient economy. Both the circular and sharing economies have presented themselves as viable options in recent years, and Cheshire - who also holds the role of senior independent director at hospitality company Whitbread - believes that these more sustainable business models pose a significant opportunity.
As an example, one of Whitbread’s brands, Costa Coffee, has embraced elements of the circular economy to overcome challenges relating to the recyclability of paper coffee cups. Currently, less than 1% of takeaway cups are recycled in the UK, and Costa is keen to drive change; implementing take-back schemes and exploring new recyclable materials to be used in the cups. By adopting this business strategy, Cheshire said Costa had become a leader in its industry, underlined by the expected growth of the company and its ever-increasing commitments to sustainability.
Financial rewards
Joining Cheshire at the BITC event were the heads of sustainability at supermarket group Sainsbury’s and telecoms company BT - two firms that have seen significant financial rewards after placing a bigger focus on sustainability initiatives.
Sainsbury’s head of sustainability Paul Crewe told delegates that the highest return on investments that his company makes now come from sustainability projects. And the results are striking: since 2005, Sainsbury’s has expanded supermarket space by 52%, whilst cutting its energy bill by 20%.
“Sustainability is about the commercial criticality of business itself,” Crewe said. “For us to be sustainable and to be here in 20 years, we need to look at our own operations and make sure that the things that we do still make commercial sense.”
Also appearing on stage, BT’s Gabrielle Giner revealed that her company’s Net Good carbon reduction programme was worth as much as £3.6bn last year - a 16% growth over two years - and is now the fastest growing area of revenue for the firm. BT's proactive approach to sustainability has been engrained in the company since it set its first emissions target in 1992 and, in 2008, the firm adopted a science-based target for emissions - a move which Giner believes strengthened the offering of the sustainability team in the eyes of the boardroom.
“The science hasn’t just helped us set the targets, it has also helped us explain to people why it was picked,” Giner said. “We’re now working with Carbon Trust to look at what a 1.5C target would mean for BT, following the results of the Paris Agreement.”
Science-based approach
Indeed, last week's event coincided with the launch of BITC’s new ‘smart growth, report, which found that the adoption of science-based-targets has become one of the biggest challenges, and opportunities, facing sustainability professionals.
Another panellist at the event, Carbon Trust’s chief executive Tom Delay, added that boards are still struggling to align two different realities of business strategies and long-term megatrends, such as climate change. One solution to this struggle, Delay said, is the use of science-based targets. The Carbon Trust has been working with a number of companies - including BT and Sainsbury's - to develop appropriate science-based targets for sustainability.
So far, 262 companies have fully committed to science-based initiatives, including 10 Fortune 500 companies such as Procter & Gamble, General Mills and Kellogg’s. Moreover, 72 Fortune 500 firms intend to set such targets by 2019. However, Delay stated that, while discussions regarding science-based targets are clearly growing, the concept still isn’t resonating in a key market: the financial sector.
“Boards struggle to create a narrative that links the business plan on the horizon with the reality of future challenges," Delay said. "They recognise that this challenge is difficult and, in some cases, they hide it from the investor community who’s long-term buy-in they are seeking to get.
“Science-based targets will demonstrate to investors and employees that what we are doing is meaningful and consistent with long-term targets. It is, in essence, the 'anti-greenwash'. But, something that became very obvious to us very quickly is that discussions around science-based targets are great but the concept doesn’t resonate with the financial community very broadly.”
Matt Mace
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