Sustainable Operations Evolves to Competitive Advantage

SR Inc’s 3rd Quarter Symposium Includes Discussion on Role of Sustainable Operations in Brand Positioning

SR Inc was happy to take part in the 11^th annual Climate Week in New York City on September 26^th with its 3rd Quarter Executive Symposium at the LEED-Gold and Zero-Waste American Express Tower. The first half of the meeting centered on the role of sustainable operations in brand positioning, with a presentation on primary research and best practices from SR Inc CEO Jim Boyle and updates from Jonathan Simkins, Global Director of PMO & Sustainability of American Express and Jason Shulman, Head of Sustainable Business Operations of Bloomberg.  Another blog post on the second half of the meeting on charting a profitable path to Net Zero Emissions will be posted next week.

SR Inc CEO Jim Boyle started off by presenting on best practices gleaned from our Member-Clients on how the role of sustainable operations is transitioning to being central to brand promise. To provide some background, we began by discussing some important news stories and milestones. In August, the Business Roundtable released an updated Statement on the Purpose of a Corporation, which underscores the importance of multi-stakeholder capitalism focusing on delivering value to customers, employees, suppliers, and communities. Another important milestone in this area was the release of the 1.5 degrees C Special Report from the IPCC late last year. In response to that report, Science-Based Target standards are tightening and moving towards net zero by 2035-2050. As a key way to get to Net Zero Emissions, scores of the world’s most influential companies are committing to 100% renewable power, on average by 2026 or earlier. During Climate Week, the Science-Based Target Initiative crossed the threshold of 650 companies committing to keeping global warming to below 1.5 degrees and the RE100 surpassed 200 companies (see Figure 1) committing to 100% renewable electricity.

Through SR Inc’s annual Member Diagnostics and Assessments with over 75 Member-Clients over multiple years, we’ve repeatedly seen five levels of maturity in a more sustainable approach to business. SR Inc advisors have found it helpful to recognize that ESG efforts often begin with a focus on compliance, then evolve through a relatively predictable path into an organized program focused on philanthropy, then cost-savings, then revenue growth, and finally strategic positioning (see Figure 2). Figure 3 shows the different levels of maturity within sustainability on the journey towards achieving competitive advantage. For example, in the Reporting area, companies focused on compliance will often not yet be reporting, while those focused on philanthropy will often begin reporting internally, those looking for cost savings might begin reporting to CDP and release a public report in accordance with the Core option of the GRI Standards, those moving into revenue growth opportunities will begin aligning their reports with SASB and in accordance with the Comprehensive option of the GRI Standards, and those in the strategic positioning level will provide global reporting leadership. Through over 12 years of work with leading Member-Clients, we’ve found that companies are often not on the same level in every area, but we’ve consistently noticed that leading companies are evolving towards strategic positioning & competitive advantage.

This is all occurring in an economy where the nature of value creation has changed over the decades. As we move to a global and service-oriented economy with limited physical assets, the percentage of a company’s share value attributable to hard assets has declined, while the amount of value attributed to the nebulous notion of “goodwill” has increased dramatically (in 1975, goodwill accounted for approximately 17% of S&P companies’ market value, but in 2015, it accounted for 84%). Since ESG strategies are often a component of preserving and expanding goodwill, making bold commitments can lead to strategic positioning and can be extremely important. When companies propose and embrace ambitious goals like 100% renewable energy or Net Zero Emissions, it can allow what otherwise might be more modest programs focused on cost savings break through to helping the company benefit from realizing more enterprise value by leveraging sustainability as a competitive advantage (Figure 4 shows a visual representation of this). Each of the four presenting companies – American Express, Bloomberg, Akamai, and Intuit – have evolved their sustainability programs from efficient optimization to strategic brand positioning with bold sustainability goals and leadership.

Our host Jonathan Simkins, Global Director of Sustainability, Global Real Estate & Workplace Experience at American Express, then presented on some impressive new achievements and commitments the company made during Climate Week. With the recent release of its 2018-19 CSR Report, the company announced that it has already achieved carbon neutrality, has hit 100% renewable electricity, and has released an ocean plastics credit card through its partnership with Parley. The partnership with Parley was backed by a senior executive from American Express and proved extremely valuable for Jonathan’s team. Starting with a zero-waste commitment at the American Express Headquarters plus the creation of a credit card made from recovered ocean plastics, the senior executive looked towards Jonathan’s Real Estate team and the CSR team to expand the company’s sustainability program.

Fortunately, Real Estate had been building a solid environmental foundation at American Express in the background for years and was ready to capitalize on this opportunity. During Climate Week, when American Express released its latest CSR Report and announced its ocean plastics credit card, it was also able to announce it had achieved 100% renewable electricity and carbon neutrality and was setting several new goals for 2025 (see Figure 5). The initial accompanying social media campaign brought an unbelievable response for the Real Estate and CSR teams. Jonathan is now finding his calendar being filled with coffee chats with colleagues across the company who are all interested in these efforts and want to get involved. Furthermore, the Real Estate team is now able to encourage other business units to set their own environmental goals and to move the entire company forward.

Jonathan ended by giving five pieces of advice for fellow SBER Member-Clients: (1) Give yourself plenty of time for the goal setting and roadmap processes. (2) Set bold renewable electricity and carbon neutrality goals. (3) Contextualize your goals within an industry and peer landscape. In the sense that the competitive landscape mattered for American Express and American Express’ goals will undoubtedly inspire other peers, a rising tide lifts all boats. (4) Sustainable Operations must be prepared to jump on any opportunity to bring their efforts to the forefront of the brand when the stars align. (5) Capitalize on colleague engagement once the goals go public.

Jason Shulman, Head of Sustainable Business Operations at Bloomberg, then presented on Bloomberg’s impressive emissions reductions achievements that have cemented its sustainability leadership role. A cornerstone of its strategy is its Sustainable Operating Guidelines, which provide a framework for employees to incorporate sustainable considerations, implement sustainable practices, and make more sustainable decisions. All plans and policies within the Guidelines provide goals, responsibility, and ongoing tracking metrics for individual stakeholders. These Guidelines are in their third iteration and have gained the support of Bloomberg’s COO and have been rolled out with department-specific trainings and maintenance plans.

Bloomberg began investigating renewable energy and emissions reductions in 2008 and completed its first renewable project in 2012. By 2013, the company set a goal to procure 35% renewable electricity by 2020 and then in 2016 expanded its commitment by joining the RE100 initiative and committing to 100% renewable electricity by 2025 (see Figure 6). Between 2008 and 2015, the company pursued a four-pronged strategy of reducing demand, energy efficiency infrastructure retrofits, on- and off-site renewables, and Unbundled RECs when needed.  These efforts reduced emissions by over 1 million metric tons of carbon dioxide and avoided nearly $82 million in energy costs. By 2018, Bloomberg had eight on- and off-site solar and wind projects and had extensive policies in place to reduce energy usage, minimize the impacts of its buildings and data centers, and reduce its carbon footprint through other business activities.

Bloomberg has also provided leadership in recent years through Corporate Buyer Organized Aggregated VPPAs. In the first months of 2019, Bloomberg announced a partnership with Cox Enterprises, Gap Inc., Salesforce, and Workday through a VPPA 2.0 to contract for 42.5 MW of a 100 MW North Carolina solar project. This will allow Bloomberg to meet its 100% renewable electricity goal by 2025 at the latest.

Jason ended with a few pieces of his own advice for other Member-Clients: (1) Sustainability initiatives should be collaborative with relevant operating departments. This collaboration promotes all parties to bring forth new sustainability ideas, especially once all “low-hanging fruit” opportunities have been addressed. (2) If you know how you’ll achieve your goals at the outset, they aren’t ambitious enough. Goals should be aspirational, and achievement will require investment in new technologies and faith that new solutions will be uncovered. (3) Private company sustainability reporting is not investor focused, but rather can be geared towards communicating with specific stakeholder groups, like employees and customers. This allows companies to convey product-related initiatives that can drive demand towards sustainable products.

We are pleased to be working with more than a dozen Member-Clients that can particularly benefit from American Express’ and Bloomberg’s advice on the impact of setting ambitious goals to help shape a best-in-class sustainable operations program. SR Inc continuously invites the input of other Member-Clients and industry leaders to offer their experiences and insights in evolving sustainable operations to build enterprise value and become a competitive advantage for their companies.

As Manager of Research & Consulting at Sustainability Roundtable, Inc., Jeff Meltzer provides outsourced program assistance to clients on a one-to-one basis, helping real estate, operations, and sustainability executives set goals, drive progress, and report the results of their sustainability programs. Jeff holds a Master of Environmental Management from Duke University’s Nicholas School of the Environment and a B.A. in Environmental Policy from Colby College. He has relevant work experience with the Procurement and Property Services team at Citizens Bank as an EDF Climate Corps Fellow, with the EHS and Sustainability team at L’Oréal, and with the EPA Green Power Partnership as an Environmental Analyst at Eastern Research Group. He has client project experience with Biogen, helping the company develop a Scope 3 supplier engagement strategy to achieve its Science-Based Target. Jeff is also an active participant in sustainability groups, is an accredited LEED Green Associate, is trained in the GRI Standards and GHG Protocol, was the Co-President of the Duke’s Net Impact club, and is an active member of the professional Net Impact Boston leadership team.