Market Drivers: Is Sustainability Still a Missed Opportunity?
In a recent article by Kristin Johansson in Paint & Coatings Industry magazine, she reviewed the market drivers in the coatings industry and commented that sustainability is now less overt and more embedded within companies. Undoubtedly this is true, however you may feel there is a ‘but’ coming up!
It is true that sustainability is more embedded, but my view is that many companies are not taking the opportunity to take full advantage of sustainability as a positive driver. Or even worse, they can allow their sustainability to damage their reputation. In my experience I see companies approach sustainability broadly one of three ways:
Risk Mitigation
A company may do what it needs to do to avoid reputational damage or legal challenge. An example of this from another industry would be where a clothing or apparel business ensures that it has no child labor in its supply chain in order to avoid adverse consumer reaction. This approach will not give the business any advantage, but will reduce the risk of negative impacts. It will also tend to be a ‘behind the scenes’ strategy rather than a very public-facing one. In coatings terms it may be as simple as having a sustainability page on the website. It says that the company is doing something, but really the page is there to avoid any accusations that the company is not doing anything!
Tactical
This is where a company may do an activity that takes advantage of a sustainability opportunity but is really only skin deep. An example here would be to offer a ‘green’ product in their coatings portfolio alongside the other products, some of which may be far from ‘sustainable’. Sustainability is on the surface but does not seem to penetrate other areas of the company, strategy or value chain.
Strategic
This is where the sustainability approach is aligned strongly with, and integrated into, the business strategy. Sustainability will appear in many functions of the company and will be considered along the entire value chain. Yes, the company may offer an overt ‘sustainable’ product offer, but these products will address the key sustainability challenges of that market sector. It also goes further. It will look at all of its impacts up and down the value chain – even in areas outside of their direct control. It will set targets and monitor progress.
In my opinion there is only one logical approach and that is the third option. This describes a leadership stance, and there are no reasons why small or large companies shouldn’t adopt this. And the good news is that it pays off financially as well as contributing to the sustainability of our world. Robecco Sam (the company that compiles the Dow Jones Sustainability Index) published a graph that shows that the share price of ‘sustainability leaders’ (those that adopt the third option I described) consistently outperform the ‘sustainability laggards’ (those companies adopting the first and second approach) (http://www.robecosam.com/images/Alpha_from_Sustainability_06_2014.pdf).
So… sustainability is often embedded now in coatings companies. They key question is, ‘is it embedded well’? Perhaps it is time to review our sustainability strategies with a critical eye.