How green is my value?
Sustainability is on the lips of almost every executive as the big issue facing business. But just how serious are businesses in really adopting the environmental agenda and how much of it is just greenwash? asks Kurt Jacobs.
Hands up anyone who's not concerned about the environment? No one, because today we're all the deepest of greens, honest.
The greening of business has been one of the most dramatic and quickest changes in corporate thinking in decades. Just a few years ago sustainability was a cause championed by people caricatured as tree huggers, earth mothers and muesli-munching, sandal wearing Guardian readers.Now, adopting a sustainable stance, even in what are considered the most polluting of sectors, has become almost obligatory for any business. After all, if BP - manufacturer and purveyor of petrol - can lead the way in becoming a green company, any business can follow.
David Middleton, chief executive of the Birmingham-based Business Council for Sustainable Development, says: "I've been involved in this sector for 20 years and for most of that time it has been like pushing water up hill, but over the past two years I've been struggling to keep above the deluge." Matthew Farrow is head of environment at the CBI - his very title says how much has changed of late. He adds: "Broadly, awareness has risen in the last couple of years because businesses are, in the end, run by people who are not blind to the undercurrents of what's going on in society generally.
The issue has been picked up by consumers, the media, investors, even the main political parties are trying to out-green each other."
So the obvious questions are why now and why so suddenly has business adopted a sustainable stance?
Most pundits agree that the groundswell had been building for some time, since the late 1990s at least, with middle-class consumers starting to take on the messages voiced by groups like Greenpeace and Friends of the Earth. Sustainability became a natural part of the corporate social responsibility (CSR) agendas that international corporations began adopting at about the same time.
It rose to the top of the CSR agenda early in this decade, when groups like HSBC and BP started making sustainability a totem in their corporate agenda.
In March 2002 BP's then chief executive, Lord Browne, declared global warming was real and that urgent action was needed. "Companies composed of highly-skilled and trained people can't live in denial of mounting evidence gathered by hundreds of the most reputable scientists in the world," he thundered.
But the tipping point for British business, most agree, came in October 2006 with the publication of the Stern Review, a dense 700-page report by former World Bank chief economist Sir Nicholas Stern that made the business case for adopting sustainability.
Its main conclusions were that one per cent of global gross domestic product per annum needed to be invested, now, to avoid the worst effects of climate change. Failure to do so could risk global GDP being up to 20 per cent lower than it otherwise might be.
Stern says climate change threatens to lead to the greatest and widest-ranging market failure ever seen: "Our actions over the coming few decades could create risks of major disruption to economic and social activity on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century."
Middleton says: "The Stern Review shook a lot of people up. He quite rightly looked at the issue from an economist's perspective.
That, combined with the blip we had 18 months ago, when energy prices shot up and businesses realised how vulnerable they were over oil and gas from Russia.
"A lot of companies changed their ideas and revaluated their positions, asking how they could improve resources management, take the cost out of energy and even come off the grid."
Farrow adds: "If you talk to businesses like HSBC, BP and Marks & Spencer, these companies are woven into the fabric of the global economy and see things in global terms. They've adopted sustainability because they see it's in their long-term interests to do so. This matters very much to them."
Middleton, Farrow and others point out another, often unnoticed, element of sustainability in environmentalism - which is that the direction of pressure has changed radically.
For decades environmentalism was championed by grass roots organisations pushing upwards. Now it's been adopted by huge multinationals who are forcing change on their suppliers and are acting as role models for the rest of the business community.
Kevin Baillie, head of sustainable economic development at the East Midlands Development Agency (Emda) says: "CSR has been around for 25 years, but it is really only in the last couple of years that we've seen this top down drive.
"There is growing customer demand for more green products and stakeholder demand for sustainability. That's being adopted by the big organisations, who are in turn feeding it down their supply chains and forcing smaller businesses to adopt sustainability, whether they want to or not.
From our perspective it is the competitiveness of the global market that is now driving the green issue."
Steve Fitzsimons, business energy manager with Midlands-based power group Npower, adds: "Some businesses are seeing the bigger picture. It is the demands of their own people who have heard the voice and tried to get into what sustainability means. Larger companies are being forced by investors and customers on these issues and then they impose their requirements on their supply networks. It's a trickle-down effect."
Perhaps the greatest pressure will come from the country's biggest buyer, the government, which annually spends some £325bn on procurement.
Currently price is the biggest driver in the government's purchasing patterns, but if that was to change then the effect on the attitude of the overall economy could be huge.
Stern's economic analysis has also given permission for companies to look at sustainability in a financial way: looking after both the profits and the planet are not mutually exclusive.
For example, Baillie says greening a company is, at least in part, a productivity issue that makes sense on purely financial grounds because it cuts costs.
Emda reckons that if businesses in the East Midlands were to universally adopt the most basic of sustainable techniques - loft lagging, turning off the lights at night, etc - then it would add some £3907m per year to the region's economy and cut up to 10 per cent on their running costs.
Farrow adds: "For some companies sustainability is a basic sign that their process could be more efficient - fewer lorry journeys, more efficient use of cooling. There's a huge market here. Companies are not doing this out of altruism, but because they realise money can be made and saved out of this. "Energy intensive companies, say those in aluminium, steel or cement, which we'll still need no matter what green policies we adopt, are taking the lead on this. Year after year these companies are finding more energy efficient ways of running their operations. Those companies have made huge progress; it's not by revolution they're becoming more sustainable, but by incremental improvements. "If you take energy companies, as another example, there are big changes afoot in issues like renewables and carbon capture.
The idea that energy companies may not be just selling power, but selling energy services as well is a big shift."
Indeed sustainability has itself become a growth industry within the Midlands with a number of businesses creating and providing green technologies.
Sustainability is also predicted to be become a major power in the money markets. Carbon trading - the system under which businesses can buy or sell government caps on their CO2 emissions - is predicted to be one of the world's biggest tradable commodities within the next few years.
But with all this greening an obvious questions arises: how serious are businesses in adopting sustainability?
Is this just greenwash - adopting environmentalism in a token manner, using it as little more than a marketing tool to be abandoned when the next fad comes along?
The general feeling that there is a lot of greenwash and posturing around, but that businesses, willing or not, are gradually being forced to actually act on their worthy stances.
Fitzsimons says: "It's lip service versus action. I wouldn't deny that many businesses at this early stage want to pay a certain amount of lip service to fulfil investors and customers' basic demands. You see companies in not environmentally-friendly industries starting to talk in green paint to deflect attention from what they really do.
"But there are truly enlightened companies thinking about sustainability, who see things in a slightly different way and see value of sustainable things. It might cost a bit more to go that extra step, but long term they think it's worth it.
"Embracing the agenda is a difficult thing to do. Companies that are doing it have a wholly different level of engagement. It goes beyond seeing the business in purely monetary values and changes the whole ethos and DNA of the company. In the long term, however, it makes the company more valuable to its people, its customers and thus to its shareholders."
Middleton adds: "I think we have passed the point of no return and we are at the beginning of a process that now has a momentum of its own. "There has been a rhetorical rush towards the green agenda, but the reality is catching up with a vengeance. The rhetoric is dying and doing is growing."
