What steps can a company take to reach true sustainability? | Future Tense: Episode 6

BY DBS, 10 MAR 2021

As society increasingly expects companies to create value for more than just their shareholders, there is greater impetus for businesses to be more sustainable. The question is how?

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In brief:

  • Sustainability can lead to more sales.


  • The purpose of companies has moved beyond just maximising shareholder value.


  • Building ownership into sustainability plans allows companies to tap into their employees' needs.


  • Incubate by articulating the purpose and mapping out goals.


  • Transform by getting buy-in and equipping with the right abilities.


  • Entrench with measurements and rewards so sustainable decisions become second nature.


  • There are direct and indirect measurement routes for sustainability.

Welcome to Future Tense by DBS, we look at what's to come for Asia and the world as technology evolves at an accelerating pace. We get you comfortable with the future as business leaders tackle big questions about sustainability, innovation, fintech and more. I'm Carolyn Camoens, a communicator, creative and conversationalist, curious about the trends shaping our world.

Today, we're speaking with Professor CB Bhattacharya about his book, “Small Actions, Big Difference: Leveraging Corporate Sustainability to Drive Business and Societal Value”. It's a timely read in 2021 as the world grapples with the consequences of Covid-19 and what value companies and corporations will bring to the table when it comes to our shared environment and well-being.

Carolyn (Host): Welcome, Professor. If you could tell us a little bit about your background and what compelled you to write this book, please.

Dr Bhattacharya: So, I have a Ph.D. in marketing from the Wharton School, University of Pennsylvania, and I was in my first job as an assistant professor at Emory University in Atlanta.

And whilst I was there, I met the CEO of this company called Ben and Jerry's.

So the CEO, Mr. Ben Cohen, so he's the Ben of Ben and Jerry's. He asks me a very interesting question. He says, ‘You know, we do a lot of good things for the environment. We support the rainforest movement. We do a lot of good things for society. We pay our workers a living wage and we support organic farming and all of that”. He said,

“Can you help me understand if what we do for the environment and for society, does it help us sell ice cream?”

And this was, mind you, 1995. CSR or corporate social responsibility was a fairly new phenomenon.

And as a marketing person, I got excited by the idea of, you know, understanding sales and what drives sales because we were always thinking about sales and how to increase sales. But nobody at that time was thinking about environmental attributes and social attributes as drivers of sales.

So I told Mr. Cohen, “Look, I don't know the answer to your question, but I am going to dig into it and look into it.”

As I was doing this research and publishing these papers and talking to these corporate social responsibility managers in various companies, I was working with – Procter and Gamble, General Mills and several other large companies.

I discovered that these CSR managers in these companies were very good people, but they were also lonely in the sense that they did not have a seat at the strategic table of the company. And everything that my research was suggesting that the positives of CSR could only be derived if it was a strategic initiative, if CSR was tied into the strategy of the company.

And so, I started wondering, why is it that something as important as CSR, and later the terminology transitioned to sustainability, if just one department or if one person in an organisation cares about this, how can we achieve these goals?

It is really, really ambitious goals that we have to achieve to prevent catastrophe. So that's when I started looking into kind of what should an organisation do to mobilise their entire workforce and possibly their other stakeholders as well. I mean, surely suppliers and surely, you know, the community members and then customers. And now, of course, we're talking about investors.

So this is the impetus that I had to kind of write this book. Small Actions. Big difference.

The shift in the role of companies

Carolyn: have you observed a shift in the way that sustainability is being approached in the general consciousness broadly, but also specifically by organisations, corporates?

Dr. Bhattacharya: I mean, every day we are shifting towards kind of doing better, not at the pace that we would like to, but the shift is certainly in place.

So, I'll give you one example, which is that the Business Roundtable in the United States, which is a conglomerate of 180 really large companies. They revised their definition of the purpose of a firm.

Previously, the purpose of a firm was defined as, you know, just maximising shareholder value. That's the purpose of the firm. And this has come all the way from Milton Friedman's kind of famous article in 1970 where he asserted that the social responsibility of business is to make profits.

And now, the Business Roundtable came out with the statement that said, no. The firm has to work for all its stakeholders, not just the shareholders. It has to work for its community. It has to work for the environment. It has to work for its employees. So that is a very, very big shift in attitude, at least, if not in behaviour.

Add to this the open letters that Larry Fink has been writing to CEOs every year, starting from 2019, or even 2018 perhaps, where he has been clamouring for companies to define a purpose and to engage stakeholders. And this year, he called for disclosure of what is ESG – environmental, social and governance – used interchangeably with sustainability as a term in industry. But he has basically said that if firms do not disclose their ESG performance, then they are not going to be in business for very long

And so I would summarise this by saying that most companies today understand why they have to invest in sustainability, but many of them still don't know the how or the what. So that's where there is a big gap between rhetoric and reality that we need to bridge.

Carolyn: And that leads us nicely to the concept of ownership. Explain to us why this is so central to your method.

Dr. Bhattacharya: The concept of ownership actually came to my mind when I was doing my research for this book, which took me to far-away places on our planet Earth. I mean, from Chile's Atacama Desert to Madagascar to Shanghai to India all over the place, visiting factories, talking to communities, and so on.

And one thing I found was that the companies that were making progress, everybody was playing a part in sustainability, whether they were regular factory employees, or they were of branch managers, or whoever they were in the organisation. They were all taking a part.

I started looking at the literature. And lo and behold, there was very interesting literature on psychological ownership which says that human beings like to take ownership. It’s part of the human condition.

Jean-Paul Sartre said, something to the effect of, and I'm paraphrasing, that we are what we have. So, ownership helps fulfil certain fundamental human needs, like the need for us to be in control of our environment. The need for identity, we like to show off the things that we own or the ideas that we own. And the need for belongingness, which is kind of, this is not just about me, but this is about something larger than just me.

So I figured that actually that sustainability fit this bill very, very beautifully. So everybody has an opportunity to take ownership of sustainability and do something about it. So that's the need for efficacy that's being fulfilled. Then, everybody can actually be proud to work for a company that is a stalwart in sustainability.

It gives their work meaning and job meaningfulness is a very big topic today because most of us are disengaged at work.

And the third thing is when you act on sustainability, you feel that you're being part of the solution. So that's the belongingness part. So this idea of psychological ownership where you don't really need to own an object, but you can feel a sense of ownership over sustainability. That was what we needed to endow employees of an organisation with, and that would accelerate the progress of an organisation on the sustainability front.

What companies need to do

Carolyn: it can appear for a lot of corporates to be such a massive task when they start down the road of thinking about sustainability, their role in the community and the environment. You share in your book some actionable steps corporations can take. Can you share with us, please, three transformational steps towards becoming a sustainable company.

Dr. Bhattacharya: So the step of incubation essentially relates to defining corporate purpose and defining a set of concrete goals for the company.

So the first task for the company in order not to get lost is really to just answer this one question. “What are we in this for?” And articulate the key societal benefit that the company is providing.

So if Unilever says, well, we want to make a sustainable living commonplace, you know, so that everybody can have a sustainable lifestyle.

And once a company is able to define that, the next step is to say, “OK, so in light of our purpose, you know, what are the material goals that we should address to achieve sustainability? Individually and then collectively?”

So, DBS, for example, a bank might find that financial inclusion is a far more important goal for a bank than cutting CO2 emissions because its CO2 footprint is not that huge to begin with. For a cement company like Lafarge, it could be that CO2 is a very, very big thing. Or for Coca-Cola, water is a very, very big thing.

So, every company, once they have defined their purpose, they need to conduct what's called the materiality analysis, which is essentially a juxtaposition of what stakeholders think the sustainability goals are that the company ought to be addressing, and what the company's managers think ought to be the company's sustainability priorities. So, the juxtaposition of those two viewpoints constitutes what we call a company's material goals. And once you define those material goals, you have essentially points of focus at that point; it's easy to articulate to your stakeholders what your goals are and it's easier to focus attention.

I mean, this is what I call the incubation stage. These are the two steps that are absolutely key in this. It’s not enough to leave it at that purpose statement because your employees might be very energised by the purpose statement of, oh, you know, we provide nourishment or we provide mobility or we empower people, but then they don't know which goals to actually work on.

But the second step would be the step where you actually launch your sustainability program into your organisation, kind of wholesale. And that's a transformative step because you are getting buy-in from your employees.

And we have there a variety of ways that we can do that. We can make appeals to the heart and say, “Hey, you know, this is the right thing to do because otherwise, what's your children going to do? You know, what are they going to eat?”

Or you can make appeals to the head saying, “Hey, you know, this is the smart thing to do because sustainability makes us money. If you save on packaging material, it actually saves us money.”

It's not enough to create that motivation or that willingness. It's not enough to create that buy-in. You also have to create ability. So you have to invest in training and management systems. You have to essentially reduce the costs of acting sustainably by providing this training, by creating management systems that make it easy to make sustainable decisions. And you have to increase the benefits of acting sustainably by promoting people, by rewarding people, by tying their incentives to sustainability performance of these kinds of things.

And then the third transformative step would be the steps that's called Entrench, whereby you create a culture in your organisation such that behaving sustainably becomes second nature for every employee.

So, you don't have to think twice. It's like putting off the tap when you brush your teeth or putting off the light when you leave a room. I mean, these have become, I hope for most of us, automatic routine reactions.

And so, we want to do the same. If you want to buy a new factory or buy land to build a factory or whatever, all of those decisions have sustainability implications and that should become routine in nature.

And there are multiple steps that you can take in that regard. One of them being measurement, kind of demystify kind of the progress that you make. So, give your employees regular progress reports on the progress that they have made, or a particular factory has made on sustainability, or a particular business unit has made on sustainability. That creates a lot of motivation and impetus for people as well.

Sustainability related communication creation, creating solutions for the employees so you can have ideas contests where you ask employees to come up with ideas of how to make the organisation more sustainable. And these have been extremely, extremely effective in organisations that have made good progress in this area.

A company by the name of ANEL, a very, very large public utility electric utility company based out of Italy, they actually celebrate failure. They have something called My Best Failure award, thinking that if you do not fail, then you're not trying hard enough to think about innovations that can help the company become more sustainable.

So, there's a gamut of things one can do to liven up the culture of the organisation and infuse it kind of with this enthusiasm of being a sustainable organisation and being a leading light in sustainability and kind of celebrating the awards.

So, the three transformative steps would be to incubate your sustainability strategy, to launch your sustainability strategy, and then to entrench it in the organisation.

Measure is treasure

Carolyn: And moving on to measuring the impact of these efforts. When do you think a company can truly claim their initiatives and efforts with regard to corporate sustainability has actually created business and societal value for the company?

Dr. Bhattacarya: So first of all, we know that you cannot manage what you don't measure. That's a well-known management proverb and a shorter one that I learned from the then CEO of Unilever, Paul Polman, is that “measure is treasure.”

I like to divide the measures into what I call the direct route, which is things that happen directly as a result of our initiatives.

So I start printing two sided immediately. I save paper. So, I save money. And paper is a precious resource, it comes from wood. So I'm saving a natural resource by printing less. That's the direct route.

But then there is the indirect route, which is kind of the stakeholder reactions to this initiative of printing two-sided. So if my employees feel happier and more proud of where they work, because now the default option is printing two-sided, if I print at all of course, that positive reaction also goes towards the return on investment, on sustainability.

And those are a little more tricky measurement exercises because you need to kind of net out the effects of other drivers of employee engagement, such as your salary and this and that. But there are statistical methodologies that are available to do that.

Carolyn: Financial institutions have been building their ESG offerings. Do you think this is going to drive a change?

Dr Bhattacharya: Huge, huge. Financial institutions have been very slow to move. I mean, I remember giving these kinds of talks 10 years ago and financial institutions were kind of not on the scene at all. And we kept saying, well, when the markets realise, when the markets price in sustainability, then things will be different.

And now they are pricing in sustainability. They are kind of looking at ESG scores and ESG performance of companies and deciding who to buy and who to sell. And this is going to have a tremendous impact in the years to come.

The big thing is oversight. So I imagine that there will be a big role as well for auditors. So much like financial audits, there will also be ESG audits and there are already firms like KPMG and PWC that do that. But this could become another big industry because there is a need for honesty so that people are actually verifying what you are claiming you've done is authentic and true.

But the move by the financial industry to hold companies to account for their sustainability performance is nothing short of fantastic.

Of future generations

Carolyn: And you conclude the book by speaking about a generation of parents being inspired by their children. Can you talk us through this, please, and its long-term impact?

Dr Bhattacharya: There is a story at the end of the book about my son and, you know, his kind of inspiration to me.

So, there is a saying that I use in my book that we don't inherit the earth from our parents. We borrow it from our children.

And this is true because our species is continuing, and we all know the joy that children bring to us and we like to see them grow nicely and enjoy the same quality of life that we have.

If for no other reason, I think that parents like myself would be inspired to dive into sustainability issues and address them for the sake of their children and grandchildren. We're talking about, let's say, 80 years down the road, 100 years down the road. What's the world going to look like? And that's not that far away that we can't feel emotional about it either. So this, I think, is a strong source of inspiration.

It certainly was for me. And it continues to be every day because I fight these battles every day and I do my little bit for sustainability. And I think the long-term impact of this can actually be tremendous.

And I think that the frame that we do this for our children can be a very, very powerful messaging frame for everyone to take up sustainability, ownership.

Carolyn: We've been speaking to Professor C.B. Bhattacharyya about his book, “Small Actions, Big Difference: Leveraging Corporate Sustainability to Drive Business and Societal Value”. And we hope it's given you some insights as to what you can do within your own corporation or from an individual perspective as well.

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