Just what does ‘sustainability’ mean to the average business leader? An open question like this will inevitably result in: ‘it depends’, because business is so multidimensional and complex. When seen from the perspective of financial performance, sustainability may be interpreted as the long-term financial health of the organisation. When seen from an operations perspective, sustainability may relate to the impact of the production facilities on the environment. From a human resources perspective sustainability may relate to the retention, health and wellbeing of employees over the full period of their contribution to the company. For some it pertains to ethics, for others it relates to social impact.
Technology vendors are moving to include sustainability functionality in traditional business applications. Is this the next 'IT in manufacturing' bandwagon or are there some significant underlying reasons to include a technology solution?
The problem with sustainability is the broad definition – it means too many different things to different people. The concept is therefore not particularly useful unless it is unpacked for the specific industry, business or situation. But inherent in its weakness is also a strength: by applying sustainability criteria to any activity it is often possible to see the impact of the activity in a new light and with a different perspective. I would like to argue that by introducing questions relating to sustainability to all business operations, decisions will be improved and business performance will benefit. And if technology can facilitate this visibility and clarity, then this is a good thing.
Business short-term
The problem with the way business works in the context of the economy is that it is very short-term in nature. Very much like a natural ecosystem, businesses are usually free to operate how they want, albeit within a regulatory environment. Certain businesses will thrive in the short term and then die, others will endure for a lot longer; ultimately the entire ecosystem will adapt to the changing needs of the market. The first challenge therefore when assessing the relevance of sustainability is to be honest about how long the business should survive.
A capital-intensive chemical processing plant is intended to operate for 20 years or more, whereas certain companies are established around clearly finite and short-term events: for example a ticketing company for the World Cup. So it is hardly surprising that the challenges relating to sustainability are found in certain industries at a far more strategic level than others. Examples of these industries where sustainability matters are mining, chemicals, natural resources, energy and utilities. And because in these industries the largest impacts are related to issues such as environmental performance, carbon footprint and energy efficiency, it is not surprising therefore that the sustainability focus in these industries is largely on EHS (environment, health and safety). Whereas for the small company developing services primarily around the World Cup, long-term sustainability may relate to business agility and the capacity to transform after the event into something else, or close down effectively. It is unlikely that EHS will be high on the list of strategic priorities for this ticketing company.
My interest is with the larger industries, where the EHS impact of operations can be significant, and the role of technology in supporting a sustainability strategy. The argument is that a clear focus on sustainability in these industries will result in better business decisions, more profitable companies and more value creation. It is therefore with some dismay that I observe that sustainability, and issues relating to environment, health and safety are somehow divorced from strategic business leadership – managers in this role are seen as a support function rather than a core function.
The broad definition of sustainability provides a means to measure every single aspect of a business operation; and therefore needs to be owned by the CEO and the board. A clear vision around sustainability will result in more sustainable business – it is that simple. It is at the CEO (and board) level that the difficult decisions are taken whereby short-term profits are put aside in favour of long-term viability. This is far more fundamental than measuring safety statistics for the annual report; or dutifully reporting CSI investments and ensuring that the glossy brochures are widely circulated to stakeholders. Sustainability in these industries is a result of the conviction of business leaders that it is not enough to do things right; but to do the right things, and to accept that to strike this balance requires great wisdom. EHS is not an isolated role; it integrates fully into the business processes, technology and operational performance of a company. It should be concerned with energy, renewable resources, human resources and financial resources. And it is made possible through comprehensive IT systems that process data to enable decision making.
Lean, agile and green
Recently I attended a series of lectures on operations management and was struck at how similar the concepts of lean manufacturing and agile manufacturing were. Moreover, I was struck at the overlap with the green supply chain. At the heart of these manufacturing philosophies are common truths that apply to all business. The balance between short-term operational efficiencies and longer term viability is one that is strongly at play in each of these environments. I concluded that it almost did not matter whether you measured inventory levels (lean) or energy usage (green); when the longer term sustainability perspective is taken into account, the resulting operational decisions are often the same.
Despite its obvious flaws, sustainability is no fad; it is intrinsic to all business and has to be taken seriously. The triple bottom line does not simply add two new dimensions to the financial metrics of a business; these dimensions were always there and successful businesses were previously paying them attention. It is worthwhile reflecting whether your company’s sustainability strategy is supported at the right levels in the business; or whether it resides as a back-office function - for example, collating mandatory safety statistics. In heavy industries EHS is certainly a strategic function; and because of its significant impact it is arguably as important as any other strategic function (technology, finance, operations). It cannot be separated from the core of the business, nor should it. A wise leader will recognise this interdependence and take action immediately to rectify this if it is not the situation in their company.
Technology-based systems do have an important role to play here. What cannot be measured cannot be managed. It is perhaps time to take another look at what the software industry is proposing in this regard. Most software vendors are enhancing their applications to now measure and report key sustainability metrics. The technology is moving forward; it is time that business embraces and organises this technology in order to reap the benefits of these new perspectives.
For more information contact Gavin Halse, ApplyIT, +27 (0)31 275 8080, [email protected], www.applyit.com
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