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Generating Business Value through Sustainability

22 September 2015

On the 10th of September 2015, The Australia- Israel Chamber of Commerce hosted an event in conjunction with Fuji Xerox Australia and the UTS Business School to examine how Australian businesses can generate value through sustainable initiatives. Including presentations from Lachlan Feggans, National Environment Manager, Fuji Xerox Australia, James Lewis, Sales and Marketing Director at Climate Friendly, and Tim Williams, Lecturer in Sustainability, Strategy and Innovation at UTS Business School, the conversation explored how the complexity of the global environment is impacting local organisations and prompting them to take a closer look at their environmental and societal impacts. Concluding the event was an open Q&A with the audience and speaker panel.

Sustainability through a strategy lens - a 'sea change' for Australian businesses, Tim Williams, University of Technology Sydney

Passionate about the future of our planet and the role of large organisations in its preservation, UTS lecturer Tim Williams spoke of a "sea change" that he's witnessing as businesses start to view sustainability as a strategic growth agenda.

According to Williams, there is now greater awareness of the absolute constraints of our planet and its boundaries, which together with population growth, urbanisation, deforestation, climate change and food security are all creating a shifting risk landscape and forcing sustainability to the top of the C-Level agenda.

With this, comes opportunity, and as Williams outlined, "...technological, social and organisational innovation is being stimulated. Emerging business models are rethinking performance, value and disclosure in the context of sustainability." Citing disruptive models such as Airbnb and Uber, Williams reinforced the promise of those businesses that pursue avenues which intersect growth with an unmet societal or environmental need.

He continued, "Green policies are being viewed in direct relation to business impact, business performance and business value for customers." Optimistic about the future of Australian businesses in relation to sustainability, Williams declared, "Many CEOs are jumping on this bandwagon, placing sustainability initiatives at the forefront of their agenda."

"ASX companies are transcending the driver of brand reputation, and are exploring sustainable initiatives as a means to reduce their risk profile, gain their licence to operate, secure investment, attract customers and increase productivity including human capital. Brand value and positive reputation is now only one consideration in a complex mix."

Beyond the tactical, Lachlan Feggans, Fuji Xerox Australia

Having worked in sustainability for over fourteen years, Fuji Xerox Australia's Lachlan Feggans is no stranger to translating the complexity of global environmental impacts into day-to-day operations. Citing the recent KPMG report, "From Tactical to Strategic," which calls out ten, inter-related 'megaforces' affecting businesses in the next twenty years, Feggans reinforced the need for businesses to understand more closely, their own context in sustainability, and address those megaforces which are most crucial to them.

Using Fuji Xerox Australia's enviro-strategy as a benchmark to other Australian companies looking to reduce their carbon footprint and increase business value, Lachlan called out four megaforces material to their organisation and explained how the company is responding to them.

Climate change, energy and fuel, material resource scarcity and deforestation were identified as critical considerations for Fuji Xerox's business and impacting natural capital. Feggans explained "Fuji Xerox Australia is an organisation which looks closely at how financial capital links back to the natural capital the company needs to operate, and we think of natural capital like a global bank account of stocks of natural resources and environmental services." He also made the point that while natural capital is a concept outside the conventional, financial economy, it's vital that organisations consider how the constraints of the earth can and will impact the natural capital dependencies material to their business in the future.

As leaders of product stewardship, Fuji Xerox remains committed to sustainable initiatives across the full product lifecycle and value chain. Feggans explained, "Fuji Xerox Australia's impact is predominantly in its global supply chain so in order to address the material megaforces, we need to look at the production and distribution of these products in our supply chain. Our product stewardship program also ensures that products and consumables collected from our customers do not go to landfill and instead are remanufactured, reused and recycled at their end-of-life."

Addressing how their efforts have resulted in business value, Feggans cited their FSC NCOS certified office paper supplies which are supporting - the Pormpuraaw Project in Cape York, and the Kariba Project in Zimbabwe. These carbon offset programs were chosen as they align closely to our focus not only on reducing carbon emissions, but also 'co-benefits' which support education for disadvantaged youth and preservation of diminishing cultures and information. He stated, "this in turn supports our customers in compensating for unavoidable impacts from the day-to-day running of their business while investing in social good."

Offering advice to Australian businesses, Feggans outlined three trends that he believes are boosting the need for more sustainable initiatives. A growing awareness of declining natural resources, consumer desire for transparency in products and services, and an increase in customer expectations are all factors that need to be considered.

He explained, "In order to meet those needs, products need to be a triple threat- they need to be high quality and functional, they need to be competitively priced, and they need to be sustainable. If a company can meet all those needs they will drive business value. By enhancing these factors and bringing them into your product, you've got transparency and trust, which then translates into transactions."

Businesses doing well by doing good, James Lewis, Climate Friendly

Simply stated, Australian Company Climate Friendly is focused on "Businesses doing well, by doing good." As part of the global, South Pole Group, Climate Friendly develops holistic sustainability solutions for organisations looking to reduce their carbon emissions and tap into more renewable energy sources.

In his presentation, James Lewis, Sales and Marketing Director of Climate Friendly, outlined three case studies of how global organisations like Microsoft and Hilton Worldwide and smaller, local companies like Planex are partnering with Climate Friendly and achieving positive results.

With their internal "carbon price" and centralised carbon investment fund, Lewis describes Microsoft as leading the way in sustainability. As part of the company's KPI to be 100 percent climate neutral, each and every business unit is on board and engaged with sustainable initiatives.

Lewis explained, "While there was a huge amount of resistance initially, this has now shifted. Rather than being viewed as a 'cost,' there's a realisation that their internal carbon fee has significant benefits for the company. Microsoft's carbon footprint is very much front of mind for everyone. There is a general awareness that each and every action has an implication- that every flight must be offset."

While Lewis acknowledges that this program may not be right for all organisations, " has however been an incredible success, and most importantly, measurable." As Lewis explains, one of the issues with sustainability is that "...the traditional metrics of financial performance don't equate very well to the broader implications and impact of the company," however, "...organisations like Microsoft, Land Rover and Philips are all doing their part to change this, by including metrics and targets for their initiatives."

Another example of a hugely successful sustainability initiative is Hilton Worldwide's Clean Air Program where, for every event that Hilton runs, a carbon neutral event is created to offset it. In terms of value generation, the program has had a significant role to play in generating new business. Lewis explained, "They can prove that they've won new business from competitors because they've been told they've won because of their sustainability efforts."

The Panel, Tim Williams, Lachlan Feggans and James Lewis

To conclude the event, the audience had an opportunity to pose questions to the panel of speakers. Not surprisingly, the discussion addressed, amongst other things, what the Australian government is doing to promote sustainable solutions in business, and how this compares to global best practice.

Global versus Local

James Lewis explained that the City of Melbourne and City of Sydney in particular are leading the way locally in sustainability- predominantly due to their level of resources. He stated, "Clover Moore is also very vocal on sustainability," with Lachlan Feggans adding that " the state level, renewable energy is an action plan for New South Wales Government and we seem to be going in the right direction. On the federal level, you'd hope this will resonate."

Contributing a more global perspective, James suggested that countries like China are taking Federal action on climate change, and are now progressive in many ways, with "significant renewable energy goals." Tim Williams reinforced the point by saying- "The conversations we are having here in Australia are not the same as in other jurisdictions, and it just shows the difficulty in actually engaging change around some of these issues from a policy point of view."

With the implied message being that Australia still has a long way to go in terms of sustainability, another member of the audience drew attention to countries like Singapore and the Philippines where the goal is for all city high-rises to be green in the next five years. In response to this point, James suggested that many Australian organisations are being constrained by traditional financial metrics, "and the need to see a short-term return on investment for their environmental incentives." In order to navigate this, he recommended they "...engage finance and procurement in sustainability and instead think for the long term about factors like risk and performance and how natural capital plays into that."

The role of corporates

Expanding on the general theme of the day, the audience also posed the question of what they can do as corporates to influence local, state and federal government about their own CSR initiatives. Lachlan suggested that while most companies have an active CSR policy, they certainly aren't influencing government stakeholders as much as they could be. "I think this is because they have a diverse group of stakeholders and government is just one of them. Ideally, we all need to be more vocal and show government that they really should catch up."

Tim similarly encouraged businesses to "...stand up and advocate. While there was a very active debate in 2006 and 2007 with changes to corporation law, we've lost a bit of that momentum." James added that " getting involved in existing, government run programs, such as CitySwitch for example, businesses are collectively sending a strong message about what they're doing and what the government could be doing more of in order to herald change."

How sustainable initiatives translate for small businesses

While large corporations are often on the right track to sustainable measures, an audience member questioned how smaller businesses can follow suit. Tim made the point that the opportunities for genuine innovation and transformation are actually more available to small businesses, as, "...some large organisations are hostages to their existing business models. They're locked in, and it's their challenge to get out of that." Lachlan continued by offering some practical advice, "From an SMB perspective, the power of networks is something that can be leveraged in order to communicate initiatives to other companies." The example of Certified B Corporations arose as an example of this, whereby a network of over 1300 organisations all commit to doing business together because of their shared outlook on sustainability.

Changing corporate mindsets

When asked whether the panel sees a general mindset around sustainable initiatives being a costly undertaking, James responded in agreeance, given his conversations are now happening as much with sustainability managers and sales and marketing as they are finance and procurement departments. He said, "The understanding of the ROI is becoming clearer though. The banks for example understand energy efficiency as an asset class, so smaller businesses don't have to finance their sustainability initiatives alone." He continued by saying, "When you've got companies like Microsoft leading the way and championing a long term perspective, we're certainly moving in the right direction."