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Scaling Sustainable Consumption
February 22nd, 2012
To achieve sustainable consumption at the scale necessary to avert staggering economic consequences, companies, industry sectors and the public and NGO sectors need to come together to change how business is done. This is the central theme of a new report issued by the World Economic Forum, the elite network of global CEOs and other stars and global influentials.
The report, “More with Less: Scaling Sustainable Consumption and Resource Efficiency,” is animated by impatience for progress toward sustainable business. These days, calls for sustainable business practices among the business community are motivated as much by opportunities as threats. But this report places more weight on the threat side of the equation. As a call to action it cites an analysis by Oxford Economics supposing a “peak metals” scenario that puts $2 trillion of output at risk by2030; and another that foresees costs of $1.8 trillion across the major global economies associated with agreed and necessary restraints on carbon.
Featuring an analysis centered on the consumer goods sector, the report lists the CEOs of some of the world’s best known companies as contributors, including Alcoa, Best Buy, BT Group, DuPont, Kraft Foods, Nestlé’ , Marks & Spencer, S.C. Johnson & Son, Unilever and Walmart. Reflecting a belief that future of sustainable consumption depends in large part on influencing consumer behavior, a number of leading marketing, advertising and public relations firms-- Edelman, Omnicom, Publicis Groupe, WPP, Aegis Media-- also contributed to the report.
A world in which escalating consumption is sustainable, according to the report, is one in which business and economic growth are decoupled from resource intensity and environmental impact. This “decoupling” has been a pillar of Unilever’s Sustainable Living Plan; the document may indicate that a growing number of companies are starting to think in these terms.
The report suggests that it will take progress along three dimensions to move us to world in which sustainable consumption is achieved at a large enough scale: demand, supply, and “the rules of the game,” or government action and the regulatory framework.
Sustainable Consumption Must Become the “Default Choice”
The report asserts that sustainable consumption has to become “the simplest and cheapest choice for consumers.” Making sustainable consumption “the default choice” requires not only dramatically improved resource efficiency in manufacturing and distribution but also effective marketing and communication to make sustainable consumption more “personal and relevant” to consumers and reflective of their values. The report also suggests there is a role for technology to play to drive engagement (perhaps through “gamification”) and transparency (as exemplified by Good Guide).
It follows from this that launching “green” product lines is not the way forward. “Green” products are a niche play, not a full-scale play, for sustainable consumption. Making sustainable choice "the default choice" means companies’ core product lines need to be sustainable.
The Supply Side Requires an “Ecosystem of Collaboration and Scale”
The report asserts that the challenges of creating sustainable consumption at an economy-wide scale are beyond the capabilities of any one company. The report calls for the creation of an “ecosystem of collaboration and scale around key activities that are beyond the remit or reach of any one organization.” An organization acting alone that optimized its own use of resources could end up shifting environmental burdens onto its value chain. “A concerted, scalable plan of action across key areas of supply will enable multiple suppliers, manufacturers and retailers to aggregate their sustainability efforts,” avoiding that problem. Industry groups need to tackle challenges collaboratively to avoid burden shifting and to find broad solutions. The implication: if you're not supporting, participating with or at least following a collaborative sustainability group such as The Sustainability Collaborative, the Sustainable Apparel Coalition or some other group appropriate to your industry, you're holding your company and the industry back.
Improve the Rules of the Game
Collectively, companies have a huge environmental impact and represent a great opportunity for improvement. But achieving the fullest potential of sustainable consumption will require engagement with and support from the public sector. To make this point, the report states that the top 50 consumer goods and retail companies have a carbon footprint across scope 1, 2 and 3 equivalent to the combined footprint of Germany and France. The report calls for governments to commit to legal and traceable supply chains and substantial and rapid increases in the production and uptake of sustainable, renewable sources of energy and materials. It says that business leaders can help shape the policy landscape in the greening of public procurement, reform of subsidies that are harmful to the economy and environment and improving regional trade agreements among other areas. The implication: companies need to be engaged and informed about the link between public policy and long-term sustainability. Your company is not a sustainability leader unless you are engaged in the public policy dimensions of sustainability.
Green Research Insight
If you're not supporting, participating with or at least following a collaborative sustainability group such as The Sustainability Collaborative, the Sustainable Apparel Coalition or some other group appropriate to your industry, you're holding your company and the industry back.”
Other Studies Featured This Month
This month we completed a study on the impact that a piece of the Dodd-Frank law is likely to have on companies. The Dodd-Frank law, passed in 2010, is intended to improve accountability and transparency in the US financial system. Unusually for a law with this focus, it contains provisions intended to cut off funds currently flowing to armed groups operating in and around the eastern Democratic Republic of Congo. These provisions, contained in Section 1502 of the law, require companies to undertake supply chain due diligence on minerals sourced from the Democratic Republic of Congo (DRC) or adjoining countries and to publically report on measures undertaken to the Securities and Exchange Commission. The law terms these minerals "conflict minerals."
Global Witness, an NGO that works to end global conflicts fueled by trade in natural resources, sponsored the study but left us alone to conduct it independently and to draw our own conclusions. We focused on how much compliance would cost different types of companies, and what benefits, if any, companies might be able to obtain from going through the compliance process.
The study found that the largest companies (with annual revenues over $50 billion) are facing one-time costs ranging from $500,000 to $2 million; companies with well developed responsible sourcing systems may need to spend only half as much. Many smaller companies should be able to meet their obligations for less than the cost of a full-time employee in the first year, with costs declining over time. It also found that companies have an opportunity to reap a wide range of business benefits associated with Section 1502 compliance. Executives we interviewed cited better risk management, improved supply chain performance, new innovation opportunities and the ability to prepare to meet a new generation of expectations for greater supply chain transparency and accountability as potential benefits of the new compliance regime. The study advises companies to look for opportunities to seize these benefits as they review and update their supply chain processes and practices.
See the full report here.
“What are your greatest business sustainability challenges looking ahead to the coming year?” This is the question that the Network for Business Sustainability, a Canadian research group, put to its leadership council in its September 2011 meeting. The council members worked to identify global priorities from the Canadian perspective by identifying their own priorities; aggregating and grouping issues into categories; and ranking challenges by importance. Here, then, is the prioritized list that came out of that meeting. It should be of value both to researchers selecting focus areas as well as businesses seeking to benchmark their own priorities against broader industry sentiment. Though this list was created from a Canadian perspective, I think you will agree that the challenges listed here are broadly applicable to companies throughout the developed world.
- How can we redefine the traditional business case to include sustainability?
- How can sustainability drive innovation (and vice-versa) within companies?
- How can we mobilize citizens to take more sustainable actions?
- How can businesses build sustainability into corporate budgeting and planning?
- How can we continue to green the firm in tough economic times?
- How can business measure progress on social and environmental issues?
- How can we quantify the productivity of environmental goods and services?
- How can businesses attract and retain employees through sustainability?
- What are the best (and worst) practices in sustainability reporting?
- How can businesses effectively engage with NGOs on social and environmental issues?