BrazilBain's Jenny Davis-Peccoud spells out the importance of sustainability
As the world’s economic system struggles to retool towards growth which does not harm the planet, companies are missing out on tapping into a possible $12 trillion in new value. Speaking at a conference, Bain & Company’s Head of Sustainability Jenny Davis-Peccoud highlighted how companies can get the ball rolling on their own sustainability transformations.
“Sustainability is moving up the corporate agenda. Bain research shows 81% of companies say that sustainability is more important today than it was five years ago. 85% say that it will be more important still in another five years. But of course the efforts we put into that are still a drop in the bucket. There’s a very small – 5% according to some analysts – chance of hitting the Paris Climate Accord goals… clearly we are not on the right track yet.”
In a month when scientists revealed that global emissions of carbon dioxide are reaching the highest levels on record – further illustrating the chasm between international goals for combating climate change and what countries are doing – Jenny Davis-Peccoud’s opening statement could not have been more timely. The head of Bain & Company’s Global Sustainability and Corporate Responsibility Practice was at pains to note that she does not believe it is too late to act however as she addressed a breakfast conference of leaders in Amsterdam – and the major opportunity sustainability represents could yet trigger the rapid corporate change needed.
“There is one estimate which says that $12 trillion of value is at risk, if climate change comes to pass. Oddly enough, another calculation says that the same amount of value can be generated if we tackle these issues. So if we work toward the Sustainable Development Goals (SDG), this could represent a major opportunity.”
According to Davis-Peccoud, leading by example is of key importance, particularly for consultancies evangelising on the importance of sustainability. To this end, she told the audience that Bain & Company has already been working to do its part – the consulting firm is one of the very few players at the top of the consultancy industry to operate 100% carbon neutral. This impressive achievement accounts for not only the firm’s office footprint but also the carbon cost of Bain employees’ travels for client engagements, including flights.
Industrial change
Davis-Peccoud asserted that industries of all shapes and sizes are already starting to move in the directions of sustainability, changing their parameters of success to promote both improved environmental and business outcomes. For example, in the automotive sector, considering most cars are used just 3% to 5% of the time by the people which own them, moving to sharing models can cut out a huge swathe of automotive production – and instead of cranking out units of combustion engine vehicles for single users, producers can save on materials, CO2, and with the move to electric this becomes even cleaner.
Agriculture can also change in the future. Restorative environmental processes might become common. Meanwhile, farmers can use drones to distribute fertiliser to precise points in a field where it is specifically needed. Even investing could see major changes. Capital flows are going to start being directed according to social and environmental benefits. Citing Dutch company Rabobank, for example, Davis-Peccoud said the banking institution has incorporated performance indicators tied to the environment into its loan and investment processes.
“In that way,” she explained, “financial services is changing quite dramatically. But if we want to realise all this fully, and move from this world to the next world, our research has shown that six key next practices need to be pursued.”
Across Europe, the US and China, Bain surveyed some 300 large companies to determine a number of options for transforming a company’s sustainability levels. These are:
- changes from stretch targeting to truly transformational ambitions;
- moving from cost focus to making sustainability part of the desirability of a product or service;
- a shift from focusing on internal operations to considering the entire supply chain and ecosystem;
- changing from established technologies to advanced technologies to accelerate sustainable practices;
- changing from reporting just on material sustainability risks to redefining value for the enterprise, including social and environmental indicators;
- and, finally, moving from innovating within a core business to possibly reinventing the business as a whole to be compatible with a sustainable future.
This last ‘next practice’ sounds like a daunting prospect, but according to Davis-Peccoud the important thing to remember is that it represents a range of options rather than a singular category on an inflexible check-list. While 90% of companies surveyed by Bain said they felt they needed to change their core business in some way to be sustainable, not every company has to completely overhaul itself, and for some that may mean taking steps to at least improve.
“Working toward the Sustainable Development Goals (SDG) could represent a major opportunity. To successfully embrace the SDGs, six key next practices need to be pursued.”
Opportunities as well as challenges
The Bain Partner further noted that it is important to be aware of the difficulties of transformation. While the research of the firm – one of the globe’s top strategic consultancies – indicates that in general, businesses see only 12% of change programmes fully succeed, and 20% outright fail, when the statistics relate to sustainability that can be even worse. David-Peccoud suggested in this area as few as 4% of sustainability changes succeed, while 47% fail. She was keen to state, however, that being realistic does not mean entities should be pessimistic about the impact of their changes, or their chances of success.
She explained; “There are some key practices which can make all the difference to improving sustainability. First, making those bold commitments and shouting loudly about them doesn’t mean you will be hammered for it. Put those commitments out there and NGOs and activists are more likely to sit with you to work on the goals, to say how can we achieve that? Instead of ‘You set a target and now we’ll scrutinise you by that, and you’re horrible’, it’s actually ‘wow, great target, how can we help?’”
On top of this, David-Peccoud added that a CEO willing to lead by example and show that sustainability is a company priority which cannot be compromised is important, making it an ‘and’ not an ‘or’. Leading on from this, sustainability targets need to be tied to the incentives of employees all the way through the company. When objectives and incentives are aligned between business objectives and sustainability, these issues should be supported by managers, not left to the employees to worry about alone. Pushing on open doors by working on easier early changes, such as those which save costs while also cutting emissions, for example, also helps to build momentum toward bigger changes.
“A good example of this is Walmart, which has made big strides on sustainability and started by looking at sustainability from a cost reduction angle. Sustainability helped them save money and reduce costs, and these are what Walmart is all about. Now they find themselves where they never would have been a few years ago where they can start to address bigger sustainability problems. Ultimately this is the key to getting the ball rolling for most companies. Think of it as an opportunity, not just of risk and cost. There’s $12 trillion in opportunities here if you believe the figures. Dream big, and be empowered,” David-Peccoud concluded.
Related: Bain & Company partner Jenny Davis-Peccoud joins Amsterdam office.
