What should a company do to be "best dressed" in the sustainability stakes?

Every company has a different approach to sustainability. Paul Hohnen dissects a range of business response strategies
What sustainability suit does your company wear? Photograph: Karen Robinson

The analogies between performance and fashion have been around since sustainable development first came onto the global agenda. From the outset, high profile public companies instinctively knew that there would be a growing sustainability beauty contest. Those that did their homework were often rewarded with a ranking in one of the many sustainability ratings that have emerged over the last two decades.

In parallel, sustainability consultants and academics mapped out clever (and usually proprietary) strategic response scenarios. Most were based on the proposition that sustainable development was a game changer for business. These showed pathways to achieving sustainable performance based on first, second and third generation management behaviours, with the last level being a sort of all-knowing sustainability nirvana.

While the models differed, they all were based on the central proposition that more information on sustainability context, sourced from ever deeper internal and external stakeholder engagement, would help improve the quality of decision-making and the integration of sustainability as a core element of a successful long term business strategy.

As I look back now over the range of business response strategies since 1992, there were broadly seven responses to the Earth Summit invitation: "Come to the sustainability ball – dress code optional."

Same old clothes

The majority of businesses didn't know or care about the theme of the ball, or decided to go in their normal business attire. Companies in this category largely haven't thought about economic, social and environmental problems or, if they have, think they are irrelevant. They do not know their sustainability footprint and, if they do, haven't disclosed it publicly. They see CSR reports as unnecessary PR. Ongoing solid market performance is confirmation to them that a sustainability-free business plan works. There was no need for a new sustainability wardrobe (although some may have invested discretely in a Kevlar vest as a precaution).

Green 'off the rack' suit

Companies in this group grudgingly acknowledged that sustainability was an issue for some governments and stakeholders. A response was called for. Their approach essentially consisted of collecting and profiling the green attributes of existing products and practices. No new internal structures or incentives were put in place, and no fundamentally different green products or services were offered. A number of communications staff were given new titles with CSR in them. Their wardrobe choice was largely driven by brand protection concerns, which meant they had a basic CSR or sustainability policy covering some aspects of economic, social and environmental performance.

Harlequin/Joker suit

Sustainable development was viewed as a real issue by members of this group, but mainly in terms of how it could adversely affect core business. Sensitive to their potential media and market exposure, companies in this category went for high visibility attire, drawing attention to their "low hanging fruit" strategy. They made much of taking smart business decisions (increasing energy efficiency, ending gas flaring), without really explaining why this wasn't done years earlier. These achievements were then appropriately highlighted in advertisements and CSR reports.

Despite broad commitments to sustainability, however, they continued to grow their core business in the knowledge that this was unsustainable in terms of planetary boundaries. No new sustainability products or services were added to portfolios. To meet this inconsistency, the core business was usually described as sustainable business and in society's wider interests. Some even actively supported contrarian positions in scientific processes and lobbied against policy reforms that risked undermining core business. They are too wealthy to care about green lists, and are quite happy to feature regularly on lists of the biggest and most profitable.

Harlequin suit, with solar panel epaulets

Companies in this category appreciated the need for a bit of differentiating sartorial flash. While their strategic approach was identical to peers above, they made forays into sustainable products or services, especially where these had a high iconic value. Images of solar panels or windmills implied leadership and part of a long term business diversification strategy, even where these made up a tiny fraction of their overall assets. Their wardrobe advisers often include high level independent advisory panels, which have helped them achieve the desired recognition on green investment lists.

Belt and braces

Members of this group instinctively understood CSR and sustainability issues and have identified the issues most material to them. Usually do-it-yourself small and medium sized firms with limited resources, they have no time for thinking about appearances. They quietly rolled up their sleeves and did their best to improve the way they work, applying the reduce, reuse, recycle approach. Sometimes they developed new sustainability service and product offerings, but mainly worked on reducing their own waste and helping local communities. Sometimes legal or supply chain requirements act as an additional driver of innovation.

Savile Row (green-lined), with matching green briefcase

A smaller grouping, these businesses get that sustainability is a mega-trend. Undeterred by the fact that they have a diverse portfolio of activities whose sustainability footprints vary, they have adopted sustainability as a serious business theme and use it to drive innovation across the company. Governance structure, management practices and business strategy have integrated sustainability elements (positions, incentives, targets).

Existing product lines are scrutinised for continuous improvements (use of water, energy, materials), and new technologies added to the portfolio (LED lamps, wind power). CEOs go on record (sometimes with peers) advocating government action on climate change. Flair in exploring shared value approach is rewarded by being rated as best dressed on investor sustainability lists. Their main worries are not investors, but lack of government and consumer interest.

Silicon Valley casual, with green Gucci trainers

Usually start-ups driven by younger entrepreneurs, companies under this heading were founded on the conviction that sustainability was the next big thing. Business models assumed that older players would be slow to change, thus creating market opportunities. They see themselves as the next generation of entrepreneur, and dress accordingly.

The CSR road is regarded as largely irrelevant: they don't see the need to tick CSR boxes or proclaim their sustainability virtues. Instead, they zeroed in on rapidly expanding product and service niches (renewable energy) and sought to excel at one thing. Adept at working with governments to obtain finance and an enabling policy environment. Business models included IPOs when market momentum had been reached. Those that succeeded often became sustainability philanthropists.

My purpose in offering these fanciful dress code distinctions in the context of Rio+20 is three fold.

The first is to accept that different companies will continue to have different starting points and strategies, depending on sector, region, history and so forth. Business is only playing by the rules of the game, as they exist. While, however, different approaches are healthy, time has run out for unscrutinised claims that "sustainable business = sustainable development". The change that has occurred in business strategy is not enough and won't be until there is more information and rigour around sustainability claims, and even more concern where no information at all is available.

The second is that the experimentation with different strategies has produced a huge amount of experience and data. By and large, this suggests that the most measurable contributions to sustainable development came from companies that use information on sustainable development not just to manage risk or defend current business practices, but to seek out new business opportunities and drive performance and innovation. Governments can and must do more to recognise, reward and replicate best practice.

The last is that all the evidence points to government policy incentives as the only significant driver of deep and lasting change. In an economic system built on unsustainable behaviours, sustainability markets don't emerge by themselves. They need to be created. Most of the major progress towards sustainable development which has been made can be directly traced to regulations, including subsidies and other government market interventions. This means more, not less, market intervention.

If governments at Rio+20 want more companies to compete with each other to win the 'best dressed' contest at the sustainability ball, they need to set a clearer dress code.

Paul Hohnen is an independent consultant and is an Associate Fellow of Chatham House. Paul has been a diplomat, director of Greenpeace International and a director of the Global Reporting Initiative.
