That’s SAP chief sustainability officer Peter Graf speaking, with whom I recently lunched in New York City — along with several other members of the press to discuss the ins and outs of corporate sustainability.
(His follow up to that comment, by the way? “Software alone won’t do the trick.”)
Joining him at the head of the table was John Gagel, manager of sustainable practices for Lexmark (the printer company), Kevin Myette, director of product integrity for REI (the outdoor company) and Jay Golden, co-founder of the Sustainability Consortium and director of the Corporate Sustainability Initiative at Duke University.
Each executive spent a bit of time presenting the issues facing their business with regard to sustainability. What follows is my notes taken during the conversation, which reveal wonderful little nuggets of insight about the pursuit of sustainability across the enterprise.
Peter Graf, chief sustainability officer, SAP
- Drive new innovation for sustainable consumption. Example: PepsiCo discovered that in Tropicana orange juice, 52 percent of its carbon footprint is caused by the fertilizer used; the resulting “win-win solution” was to simply stop buying that fertilizer, saving money and boosting sustainability.
- Actually ask your suppliers the question, ‘How do you produce that?”
- Risk and compliance is also a driver. Example: As an American design firm that produces in China, sports apparel maker Nike is “obsessed” with managing human rights. “They need to manage that very, very closely.”
- Government regulation is the least effective driver because it doesn’t create competitive advantage. “Because when it’s the law, everybody has to do it.”
- Four advantages to sustainability: win market share, find new sources of innovation, drive costs down, de-risk and comply.
- Companies have fared much better in their stock performance if they were in the Dow Jones Sustainability Index. The average investor is now asking: “Do they have a good long-term strategy and do they have risk under control?
- “Right now, every business process is designed to be linear. But in the limited environment of the planet, you cannot expect this to continue forever.”
- There is little difference between Europe and the U.S. “When there’s a business case, businesses tend to react similarly. Europe is ahead of the U.S. culturally, but the U.S. is catching up.”
John Gagel, manager of sustainable practices, Lexmark
- Challenge is opportunity, especially when you’re working with your supply chain partners. They are more likely to listen to you when you come to them and ask them about sustainability. “It’s advantageous for all.”
- We’re all on the same planet. “When you step back, the concerns are the same, but how we approach it might be different.”
- Ask yourself: how many layers deep do I have to go to make a true, lasting impact? The first, second, or third tier of the supply chain? For Lexmark, tin and tantalum are important materials — but require the company to investigate five or six levels down, to ensure that the materials aren’t illegally coming from the Congo.
- Social issues are connected to sustainability, and they’re often outside your control.
- Regulation may be a driver, but ask yourself: how far are you going to go down? And how realistic is it to get meaningful data from your supply chain?
- Communication is key. Set a baseline set of expectations for suppliers, and “your life will be much simpler, because you very quickly weed out those that don’t want to play the game.”
- Most companies work with the same companies in the supply chain. “We work with the same suppliers. They’re not just hearing it from us, they’re hearing it from multiple directions.”
- It’s not a one-and-done deal. “Once you get them working for sustainability, then you need to continue that conversation — audit, check, invite them to innovate.” Include product end-of-life discussions: ”Have conversations at the design stage to be sustainable at end-of-life.”
- Report data on successes and failures. The data process must be more efficient, more effective.
- “You would be shocked at the innovation that occurs when you just get a few people talking about the same thing.”
- Innovation in sustainability leads to a more efficient business. “And a more efficient business leads to profit growth — the real financial gains that a company must make. You take cost out of your business.”
- What helps to get there: “Show [them] the business case. You have to understand the language of business. You have to take the language of sustainability and translate it to the language of business. If you mash those two, you’re going to hit a home run.”
Kevin Myette, director of product integrity, REI
- Myette directs quality safety and sustainability for REI, the largest consumer cooperative in the United States. “I live in the supply chain.” He counts 112 stores nationwide, and $1.5 billion in revenue.
- “Sustainability is really the next quality. It’s an amazing platform for innovation. The challenge is, how do we really make progress?”
- Transparency is no longer optional. “It was values-driven. It really is, and needs to be, business-driven. The supply chain has enormous challenges. As much as we like to think we know what goes into our products and how they are made, it’s really hard to [know].”
- “The language of sustainability is muddled. It’s really unclear.”
- “The challenges are rooted in a supply chain that’s really been efficient in delivering product but not information. And because we haven’t been clear about what that information is, it’s enormously difficult to develop and recreate that pathway.”
- “One of the big challenges in the supply chain is trust. It’s not just for the good of us as a company, but it’s for the good of the supply chain, the good of the industry, the good of the planet.”
- Sustainability is a team sport. “We look at things that we can do uniquely as an organization and things we can do together with our suppliers, including the language. There is a cacophony of noise on what sustainability really is.”
- Scalability is important. “Scalable is applicable for both size of organization and where they sit in the continuum of where they address this challenge.”
- Sustainability must be full life cycle. “All the way back to feedstock. In the apparel world, [that may mean] less cotton, more synthetic — so it’s oil-based.”
- Conversations and community are key. “We see ourselves as a connector. It isn’t the Eco Index that’s valuable, it’s the ability to create that.”
Jay Golden, co-founder of the Sustainability Consortium and director of the Corporate Sustainability Initiative at Duke University
- “About 30 years ago, I was a badge-carrying, gun-toting environmental crimes detective. My passion was to protect those who couldn’t protect themselves.”
- “Really, we’re talking about how you protect consumers, eco-services and the economic viability of those services. My PhD is in sustainability engineering.”
- We’re moving into product and service sustainability. “What data is really valid? Does it really have any richness? What’s the uncertainty of this data?”
- Sustainability challenge No. 1: Transparency and scientific rigor. “Please don’t call it ‘green’ products. We don’t want to limit it to just environmental [impact]. We want to include social aspects. Validation needs to be a part of this process.”
- Sustainability challenge No. 2: Consistency in measurement and reporting. “There’s a convergence of regulatory impact — no longer 12 different ways of reporting.”
- Sustainability challenge No. 3: An educated workforce. “The next-generation of engineers, MBA students and scientists [need to be] trained [in sustainability] not as an ambition, but as a science. They have to be trained in the tools of the profession. You have to understand what the limitations are. Otherwise we’re just talking.”
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