Seven Reasons to Make Sustainability a Focus for Your Business

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The company’s turnaround has become one of the success stories of corporate integrity in the last two decades.

Volkswagen – The emissions cheating scandal

At the end of last year, the publishers of the Dow Jones Sustainability Indices announced that Volkswagen will be removed from the investor-focused corporate social responsibility rankings. The car manufacturer embroiled in a diesel emissions cheating scandal across 11 million diesel-powered cars owned by consumers around the world was no longer recognized by Dow Jones as the automotive industry leader in sustainability. The $50 billion German auto giant Volkswagen AG had been named best in class for automotive industry sustainability

The ripple effects of the Volkswagen scandal go well beyond the 11 million cars affected, the CEO’s resignation, and the steep fines ($18 billion) the company is facing. It’s an illustration that being clean and green has real, bottom-line value, protecting the environment builds trust, and trust is precious capital.

Trust comes from transparency, and transparency is the norm today. While it’s surprising that the company tried to pass off its cars as “clean diesel,” it’s even more surprising that the company’s leadership thought the plan wouldn’t come to light.

- TAXATION AND LEGISLATION

The Rise of 'Tax Shaming'

Global firms such as Starbucks, Google and Amazon have come under fire for avoiding paying tax on British sales. There is a growing culture of naming and shaming companies.

Starbucks, for example, had sales of £400m in the UK last year, but paid no corporation tax. It has now paid £20 million to the government after it faced protests and boycotts following the revelations.

Amazon, which had sales in the UK of £3.35bn in 2011, only reported a "tax expense" of £1.8m and Google's UK unit paid just £6m to the Treasury in 2011 on UK turnover of £395m. Everything these companies are doing is legal but the tide of public opinion is visibly turning.

Legislation

2015 saw a series of high profile events that changed how the global economy views the value of businesses incorporating positive social and environmental impact into their operations and moves sustainability from a ‘a good thing to do’ to a legal obligation leading to an increased demand from stakeholders for transparency and action.

- The Modern Slavery Act – from October 2015, all businesses in the UK with a turnover of £36million or over are required to publish an annual slavery and human trafficking statement, which must be approved by their board of directors and posted in a prominent place on their website.

- Launch of the UN Sustainable Development Goals - in September 2015, the United Nations released The Sustainable Development Goals. The goals are an intergovernmental set of 17 goals with 169 targets that cover a broad range of sustainable development issues. Beyond poverty reduction and education, climate change, energy access, biodiversity and oceans are also covered. The SDGs will guide policy and funding for the next 15 years. Companies should use them as a framework to expand their focus over the long term.

- COP 21- in December 2015, 186 countries came together in Paris to form an action plan to reduce their greenhouse gases and keep the global rise in temperature below 2C. Although progress was made, the commitments made by the countries will not keep the world from warming 2 degrees. Global warming is still predicted to be between 2.7C and 3C. The Paris agreement has therefore asked all countries to review these contributions every five years from 2020. Those countries will not be able to lower their targets and are encouraged to raise them

- as technology and public policy allows. The COP 21 agreement ensures that, when passed, regulations will be shifting on a global scale. The world’s governments will be setting new policies over the coming years to cut carbon emissions.

- SELF-PRESERVATION

Resource Scarcity

Today’s CEOs see resource scarcity as a critical issue, with one global survey saying that 46% of CEOs agreed that climate change and resource scarcity will “transform their business”. Today, cotton and polyester make up 80% of the fabric used in the garment industry, and even transitioning to organic cotton would still put a strain on the planet in terms of resources needed to produce that amount of one fibre. But it’s not just fibres – these difficult choices are rapidly approaching many areas of production. At current rates of consumption, we may have just half a century’s worth of oil and gas available.

“Two key impacts will result from failing to include climate change adaptation into a company’s sourcing strategy. Firstly, reduced availability of key natural raw materials due to water scarcity will require substitution by synthetic materials. The touch, feel and look of classic luxury apparel and jewellery will change as a result of use of alternative raw materials and secondly, historic investment in spinners, weavers, smelters, processors, etc., in the value chain will result in stranded assets no longer able to access raw materials. This will require additional investment in new geographies, with a negative impact on quality and supply security as new suppliers attempt to meet the performance levels of long-term partners. Brands should be aware, climate change adaptation expertise must be a key area of competence for procurement directors for the rest of this century.”

Patrick Laine, CEO, Better Cotton Initiative

Kering’s Environmental Profit and Loss

2015 saw Kering make their first Group Environmental Profit and Loss account public and open-source their methodology. Not only does this methodology provide transparency to all stakeholders including consumers, but it can help shape the future business strategies of other firms across all sectors.

Kering is also leading-edge in its approach to self-preservation through its Materials Innovation Lab (MIL). Knowing that designers do not have a lot of time to experiment with textiles, Kering’s MIL provides support to its brands through a comprehensive library of sustainable materials and technical expertise on sustainable approaches to sourcing and manufacturing fabrics and fibres. Along with the Kering sustainability department, the MIL also provides recommendations