It won’t be long before every company, big and small, needs to take a closer look at its sustainability strategy.
A new study by the Business Development Bank of Canada found that small- and medium-sized suppliers that don’t take part in environmental and social governance (ESG) reporting are in danger of being left behind. Fully half of the companies polled said they believed that adopting these practices would be good for business, and almost one-third felt that doing so would make it easier to attract and retain employees.
So where to start? By building a sound strategy that lays out everything from what sustainability means to a business, the steps it might take to, say, reduce greenhouse gas emissions and how it plans to communicate its strategy internally and externally, says Dana Krechowicz, Assistant Vice President of Sustainable Finance for HSBC Bank Canada. “All companies need to think about sustainability if they haven’t yet, because there are so many drivers for change, such as regulations, customer and employee demand and more,” she says.
Many companies who have started on sustainability say it’s added a lot of value to their business. Here are just a few ways you can develop a sustainability strategy, too.
Identify the issues
In 2021, when David Fraser became President of Regency Fireplace Products, a Vancouver-based company that manufactures gas, wood and electric fireplaces, one of his first goals was to make the business more sustainable.
Determining where to start was easier for him than it may be for others, giving Regency’s parent company, NIBE Group1, a large Swedish organization with a deep sense of environmental responsibility, wanted its businesses to leave smaller carbon footprints.
It examined all parts of its businesses that emitted carbon dioxide and chose to focus on reducing emissions at its Delta, B.C., facility. It plans to slash CO2 emissions by 65 per cent from 2019 levels within the next seven years. The company is also trying to find a Styrofoam-free way to package its products and make sure its fireplaces are energy efficient enough to qualify for enticing consumer rebates. “Sustainability, to me, was an opportunity for us to take a hard look at our business,” says Fraser.
For others, determining priorities often starts with talking to company stakeholders, including customers, staff, investors and others, to see what sustainability priorities they care about most. Also looking at what competitors are doing, says Krechowicz.
The Sustainability Accounting Standards Board is another place to look for ideas. It’s a non-profit that identifies sustainability issues most relevant to financial performance across 77 industries.
Master your metrics
Once a company’s key issues come into focus, you’ll want to formulate a plan to manage those issues, including identifying and tracking sustainability metrics to measure progress over time, Krechowicz says. What to track will depend on the business, but it could include water use, greenhouse gas emissions, employee health and safety and more. Having metrics in place makes it easier to see whether any changes made are having an impact on core business metrics, such as profitability.
Regency looked at how many gigajoules of natural gas they consume, which is a key contributor to the CO2 emissions its Delta plant was putting out every day, as well as how much solid, liquid and gaseous waste it produces. When the company began paying closer attention to its metrics, what it needed to do to make its facility more energy efficient became more obvious. The company is now exploring ways to transform how it heats its building, potentially using heat pumps instead of fossil fuels.
For sustainability to truly take hold within an organization, companies must also consider the impact their efforts might have on financial metrics, such as sales, growth and customer retention. “Ultimately, your sustainability strategy has to be coherent with your business strategy and it has to add value,” Krechowicz notes.
Find your passion
Developing a sustainability strategy is a group effort. If a company wants everyone pulling in the same direction, it’s vital that the process reaches into every area of the organization. “A sustainability strategy shouldn’t stand alone in a silo,” says Krechowicz. “That’s setting it up for failure. There has to be senior level buy-in, but also buy-in at the employee level. That’s one of the most important factors for success.”
This was certainly the case for Regency, a company that credits much of its progress to finding a quality manager who was serious about sustainability and the environment in general. “There are lots of people that have a nice resumé and background, but they need to be passionate about this,” Fraser says. “And it shouldn’t be the most senior executive either because, if they’re leading it, they’ll get buy-in because of their title. It’s better if this person is a level or two down because you’re amongst the masses if you’re a peer.”
Building for the future
A sustainability strategy isn’t stagnant. The process should, and will, evolve over time. For instance, once Regency started developing its sustainability plans, it decided to launch a volunteer Climate Care Committee that meets regularly to discuss progress and identify any new issues that can strengthen its strategy. In addition to keeping a company focused on its goals, these kinds of groups give employees a chance to become invested in the process.
For its part, HSBC is increasingly sought out by its smaller and medium-sized clients to help them meet their ESG goals. While the bank is not a sustainability consultant, it can use its extensive global research and insights to lend a hand.
“We recognize that small and medium-sized enterprises need help,” says Krechowicz. “We share our thought leadership and what we’re seeing in the market – what their peers are doing, what other customers are doing. We can give customers options to think about as they move toward sustainability.”