Sustainability: From Charity to Environment

Sustainability is not a one-size-fits-all proposition. Its impacts and opportunities are very context-dependent. What is important to one company is not necessarily important to another.

 

Effective sustainability initiatives are closely linked to company strategy, and successful companies evaluate their sustainability impacts, risks and opportunities across their entire value chain -- from product design through the use and ultimate disposal by or recovery from, the end customer; from the supply chain, facilities and operations, through to distribution and logistics. 

 

In October 2010, a sample of AICPA, CIMA and CICA industry members in the UK, US and Canada were invited to participate in an online survey. The study delved into issues such as sustainability drivers and strategy, sustainability program scope and priorities, measurement, reporting and assurance, and the finance function’s involvement. 

 

According to survey respondents, facilities (34%) and operations (34%) were the highest priority business areas, followed by product design (29%), customer use of products (29%), supply chain (25%), end of life product disposal/ recovery (21%) and distribution and logistics (20%).

 

Though the relative ranking of areas is similar across large companies and SMEs, the latter group is less likely to classify these issues as a high priority. 

 

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Exhibit 1: Business area - high priority
Sustainability strategy

In addition to examining the primary sustainability drivers identified by survey respondents, the survey also queried the level of formality and importance that organisations apply to the discipline. Among larger companies, 79% currently have a sustainability strategy compared with only 33% of SMEs.

 

Just as company size matters in terms of the existence of a formal sustainability strategy, so, too does location (as determined by the country in which each respondent’s association is based). CIMA and CICA respondent companies are more likely than AICPA respondent companies to have formalized sustainability strategies.

 

Additionally, 81% of CIMA respondents from large companies (with formal sustainability strategies) report that their organization’s sustainability strategies address climate change compared to 49% of CICA respondents (from large companies with formal sustainability strategies) and 44% of AICPA respondents from large companies (with formal sustainability strategies).

 

CIMA respondents from larger companies (47%) also indicate that their organisations treat sustainability programs as a high priority more frequently than CICA (38%) and AICPA (33%) respondents (see Exhibit 2). Larger companies are more likely to create distinct sustainability offices – corporate functions responsible for executing sustainability strategy – within their organisational structures.

 

While less than 14% of SMEs in any of the responding companies establish separate sustainability functions, 58% of large CIMA-respondent companies, 45% of large CICA-respondent companies and 36% of large AICPA-respondent companies elect to do so.

 
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Exhibit 2: Sustainability as a high priority

These international differences appear to support the perception that UK and other European companies generally are ‘ahead of the curve’ with sustainability capabilities compared to US-based companies (while CICA respondent organisations appear more ‘European’ in their sustainability progress).
 
These differences likely relate to several factors, including the existence of a Carbon Reduction Commitment Energy Efficiency Scheme, which is the UK’s mandatory climate change and energy saving scheme for large public and private sector organisations. The survey findings throughout this report also show notable differences when comparing smaller organisations to larger corporations.
 
And while sustainability does not formally qualify as a high priority in a majority of respondent companies, a majority do indicate that sustainability considerations are included in their investment analyses (see Exhibit 3). This finding suggests that sustainability represents enough of a priority to be integrated into investment decisions.
 
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Exhibit 3: Included in investment analysis

Case study: Woodbine Entertainment

About a decade ago, Woodbine Entertainment Group, a Canada-based horse-racing operator, started developing a sustainability program that primarily consisted of community investment activities. After achieving early success in its charitable efforts, the company expanded its definition of sustainability to include environmental efforts that also generate significant efficiency gains.

 

Jane Holmes, Woodbine Entertainment Group’s vice president, corporate affairs and corporate social responsibility officer, notes that the structure and processes required of community-investment and other corporate social responsibility (CSR) initiatives translate well to environmental efforts.

 
The company’s not-for-profit status, a rarity in the horse-racing industry, made its community efforts stand out because very few not-for-profits in any industry make sizeable charitable donations. Woodbine is the only not-for-profit member of Imagine Canada, a national program that promotes public and corporate giving, volunteerism and support to the community.
 
The benchmark of Imagine Canada membership involves donating 1% of pre-tax profits to charities. Woodbine Entertainment exceeds this requirement by donating a minimum of 3% of net revenues to charities each year.
 
Environmental initiatives
The company formalized its community investment activities eight years ago. More recently, the company’s leadership realized it could apply similar procedural discipline to environmental initiatives – after investing roughly $12 million to replace a dirt horseracing track with a synthetic track.
 
The move to a more forgiving track surface was intended to bolster safety for horses and jockeys; however, the company quickly discovered that the new surface did not require watering or nearly as much grooming by tractors.
 

To measure and report on its reductions in water usage and carbon emissions, Woodbine soon applied similar decision-making and tracking processes it previously used to manage its community investment efforts. The company subsequently built upon these efforts by:

 
  • Appointing sustainability officers: Woodbine’s board of directors created the role of corporate sustainability officer (Holmes) and environmental officer to oversee the company’s activities in these areas.
 
  • Establishing a ‘green action team’: A team of middle managers and front-line staff work together to identify potential savings that can be generated through environmental projects, such as waste reduction, the use of solar-powered external lighting and rebates from electric providers and government agencies from the move to more energy-efficiency systems within its aging facilities.
 
  • Involving the CFO: If an environmental initiative proposed by the green action team is approved the Green Steering Committee, comprised of the Company’s CSR Officer, Environmental Officer, Senior VP Operations, Director of Energy Manager, Sr. Manager of CSR and Director of Purchasing, creates a business case that is then presented to the CFO for evaluation. The environmental officer, who also serves as the company’s director of property development, also reports to the CFO.
 
  • Measuring employee and customer perceptions: To keep tabs on the effectiveness and value of its sustainability efforts, Woodbine measures employees’ perceptions of the sustainability program in engagement surveys (recent results of which suggest that sustainability marks a ‘very strong driver’ of employee engagement, Holmes notes) and customer exit surveys. More than 80% of customers leaving Woodbine’s race tracks indicate that the company’s sustainability programs positively influence their decision to do business with Woodbine. 
 
About the Author
CIMA, the Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body for management accountants, with 183,000 members and students operating in 168 countries, working at the heart of business. 
 
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