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Is sustainability affordable?

March 3, 2015

“There is a profound shift going on”, according to John Elkington, Executive Chairman of Volans.

John was my co-presenter at the Ecovadis conference in Paris, discussing the progress and challenges of sustainability. The size and quality of the audience at this event, together with the growth being experienced by Ecovadis, are clear illustrations that sustainability is very much on the business agenda.

In my presentation, I highlighted the point that reputation is now of massive importance to boards and executive management. Indeed, recent CEO studies emphasize this point, with a survey in the Financial Times revealing that ‘honesty and integrity’ are now top of the CEO agenda. So if market perceptions matter so much, it is clear that there needs to be greater focus on ensuring the right relationships and the right suppliers. Organizations are growing increasingly dependent on their supply network – many now spend 70% or more of their revenue on external supply. So ensuring the integrity of supplier behavior is no longer optional – it is essential.

Several speakers illustrated this point, outlining how top corporations like Nestle, Nokia, Societe Generale and L’Oreal are embedding sustainability principles into the way they do business. They have moved beyond simple codes of conduct with steps that include:

– significant weighting is given to each supplier’s ethical behavior within the selection process

– individual buyers are measured and rewarded on their sustainability performance

– the frequency and rigor of supplier audits is increasing, with remedial steps identified and agreed

– sustainability issues now form part of the contract, with direct consequences for failure (including immediate termination)

These steps indicate that health and safety, remuneration policies, working conditions, compliance with environmental laws and regulations are all being take seriously.

Challenges remain. Among them, the question of how widespread ‘good practice’ actually is. And when it comes to increased costs, are companies willing to trade off savings for sustainability? Based on the CEO surveys, I think the answer increasingly is yes – executives understand that a failure to observe sustainable practices carries a very real cost.


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