The second in a series of articles by Sunil Shah of Acclaro Advisory on sustainability looks at developing a sustainable strategy and how to take your carbon programme beyond a short-term initiative
Business drivers such as employee engagement and investor pressure are encouraging many organisations to make bold commitments such as carbon neutrality. Beyond these commitments is a need to better understand the organisations’ carbon emissions and how to mainstream investment in efficiencies and integrate behaviours into the culture.
What is driving this change in corporate behaviour?
- Employees are becoming a major driver.
Developing a culture of Corporate Responsibility and a purpose driven organisation are necessary for attracting and retaining talent. Starting from the recruitment phase it requires attracting individuals who align with the values of the business and can respond to dialogue associated with being a good corporate citizen.
- Regulation has also played a role in driving energy performance in the past 15 years. It has raised awareness and provided data to enable informed decisions to be made. But a lack of enforcement and incentives for implementation has seen much of the early ambitions on savings fade away.
- Cost is anticipated to increase by up to 100% due to the rising cost of fuel together with the additional costs to maintain and upgrade the infrastructure(1). We are seeing this shift already in the proportion of energy bills related to consumption and to overhead charges.
- Investors are also taking a keen view. The TCFD(2) sets out requirements for financial disclosure of climate risks which all stock market listed businesses need to respond to. Property is one of the biggest risks to an organisation, with climate change negatively affecting the book value(3).
Of these drivers, regulation will only play a limited role if low enforcement continues. Investors, cost and employees will be placing more pressure on larger organisations and this will cascade down the supply chain. Traditional barriers for most organisations have been the ability to translate these drivers into actions and then communicate the results – this represents a direct opportunity for FM to get involved. How to do this is via a strategy which has defined targets that align with the business.
DEVELOPING A STRATEGY
Building a strategy requires knowledge from a range of departments and activities within the organisation. The strategy will depend very much upon the culture of the business and its approach to both risk, returns and its maturity on the sustainability curve(4).
A critical output is the ability to measure, track and value the impact of sustainability activities on core business and financial metrics. To do this will require an understanding of the underlying drivers and provision of a single measure performance indicator to communicate the value of these sustainability activities.
The first step towards developing a strategy is to perform a materiality review – looking at a matrix that links the importance of sustainability to both the business (e.g. delivering value) and external parties (e.g. managing risks). The process of understanding the business and stakeholders is often underestimated but can provide a very clear insight into how value can be generated in conjunction with improved sustainability performance. A starting point for the materiality review can be taken from the SFMI assessment(5) which has defined 23 material issues for the FM sector. Data will be required to support the review together with interviews to provide the supporting context.
Incorporating supply chain activities within the materiality review is important, helping to bring in the wider impacts of the operations and therefore the potential additional value – this will also mean understanding them as stakeholders with regards to what can be achieved.
Plotting the matrix will essentially be a series of dots, with those in the top right quadrant typically identified as those which are important to stakeholders and will also deliver the greatest value to the organisation. That is the starting point, because each of these will need to be developed and implemented, with progress and value communicated through a series of actions or defined targets.
The resulting material outputs, the actions, and the value captured will help to communicate the strategic direction to the senior management in a language that they understand along with the value provided by the FM team.
CHANGING THE CORPORATE CULTURE
Responding to market pressures such as carbon neutrality and removal of single-use plastics, without being part of a wider strategy will not change the corporate culture, but will instead reinforce the idea of task-based activities being the remit of FM. Ultimately, this doesn’t need KPI’s as initiatives are task based and therefore doesn’t get traction within the business.
The power that underpins this approach is to define very clearly the value that FM provides to the business in a language which is understood and connects directly into the reporting measures. This doesn’t have to be about just costs, with employee engagement and investor pressures also significant.
In many cases, to achieve the value there will be shared responsibilities and outcomes which will help both parties – ‘what’s in it for me’. The move towards employee engagement and where FM supports is a prime example of this, helping reduce turnover and improve satisfaction.
The imperative is not just internal within the FM department, but with wider business including procurement and supply chain management having a key role. It is this activity that the third article will focus upon.