Business owners and executives are facing a complex set of social, environmental, market, political, and technological changes. A substantive number of organisations and industries in South Africa have been experiencing rapid, massive, and sometimes devastating change over the last 10 years. This rapidly-changing environment requires flexible, innovative and sustainability-based management, supported by management systems that can accommodate them.
Understandably, organisations are reluctant to place sustainability at the centre of business strategy, believing that costs outweigh the benefits. On the contrary, business experience points to the opposite effect – embedding sustainability can benefit performance and ensure survival.
The competitive advantage of stakeholder engagement
The aim of traditional business models is to create value for investors. Today, organisations are involved in multiple relationships, making them interdependent and reliant on each other for success. Sustainable organisations create value through engagement with stakeholders, which places them in a position to anticipate and react to changes when they arise.
An instance of the necessity for adapting to change is evident in South Africa. Everyone understands that development and economic growth are impossible without sustainable water supplies. Many public and private organisations still focus solely on improving water efficiency or implementing water-related corporate social responsibility projects. A great example present – while SABMiller works to improve water efficiency in its operations, the organisation’s water risk occurs beyond the factory gate. To secure its water supply, SABMiller has formed key partnerships to understand shared water risk in Tanzania and South Africa.
Until recently, water stewardship was a fringe idea. However, organisations like Nestlé and Coca-Cola have emerged as influential water stewardship leaders, joining forces with the International Finance Corporation to form the 2030 Water Resources Group, which tackles water scarcity.
Good stakeholder relations can also avert disastrous conflict situations, which can severely disrupt operations. The Marikana tragedy of 2012 is a sobering reminder. Investors took a huge knock and responded by questioning whether the strike pointed to wide-spread labour relations problems in the Lonmin Group, and spelt the end for South African platinum mining.
Improving Risk Management
Global supply chains are vulnerable to many risks. A McKinsey survey revealed that 90% of organisations could point to ‘a specific event or risk’ – such as consumer pressure – that triggered their commitment to sustainability. McKinsey reports that risk related to sustainability issues can be as high as ‘70% of earnings before costs’.
In the agriculture, food, and beverage sectors climate change can alter growing conditions, causing disruptions in supply. Nestle works with small scale cocoa producers in West Africa and other countries to improve crop yields, train farmers and monitor child labour practices.
Unlike traditional business risk, social and environmental risks manifest over a longer period, often affecting an organisation in multiple areas. These risks are largely outside the organisation’s direct control, and managing them may require investments for capacity building and developing adaptive strategies.
Investing in sustainability can drive innovation. Redesigning products to meet environmental or social needs offers new opportunities. Unilever has embraced an end-to-end sustainability approach and has responded to water-scarcity by developing a dishwashing liquid that uses less water. Sales of the product outpace category growth in certain water-scarce markets.
Building Customer Loyalty
Today’s consumers expect transparency and honesty, and can choose from many sustainable, competitively priced products. In fact, in the food and beverage industry, a growing number of consumers are considering values beyond price and taste in their purchasing decisions.
Improving Financial Performance
Over and above the financial benefits that arise from competitive advantage and innovation, organisations are saving costs through better management of natural resources. Moreover, investors are paying attention.
By tracking environmental, social and governance factors, investors are seeing an overall improvement in financial performance. Dow Chemical has an ambitious environmentally-driven business model, which CEO Andrew Liveris says is good for the earth and the bottom line.
ISO standards support long-term sustainable success
Sustainability can only be achieved by following a relentlessly process of continual improvement. ISO has developed a number of standards, each of which details approaches to achieving long-term sustainable success.
An organisation can thrive in any one of the following areas, by either implementing a standalone or an integrated Management System:
ISO 9001:2015 Quality Management Systems (QMS)
ISO 9001:2015 focuses on continual improvement and provides management with the ability to improve by bringing together quality management system results and business performance results.
ISO 14001:2015 Environmental Management Systems (EMS)
ISO 14001:2015 focuses on continual improvement and promotes environmental sustainability.
ISO 45001:2018 Occupational Health and Safety Management Systems (OHS)
ISO 45001:2018 focuses on risk assessments related to workplace hazards with participation across the organisation and drives continual improvement.
ISO/DIS 50001 Energy Management Systems (EnMS)
ISO/DIS 50001 (pending a release of revision) focuses on continual improvement and assists organisations to integrate Energy Management into their efforts to improve Environmental Management.
For more information or guidance on which ISO standard(s) and services would best suit the needs of your organisation, please email Risk ZA at email@example.com or contact us on 0861 Risk ZA / +27 (0) 31 569 5900.
1 thought on “How to become more effective: building sustainable business”
This blog does highlight the benefits for corporations to give more attention to sustainability and the use of ISO management systems to achieve goals. The jury is still out on whether large corporations are on the loss-making side of the curve. Evidently history repeats itself as in the case of Marikana, for many a “Marikana” -type risk is being overlooked in boardrooms. Ask any HR director sitting on risk or investment committees? Or watch the share price this coming week of Impala Plat., which has already experienced a significant drop.
It seems that if the business case for sustainability is taken seriously enough, we aught to find sustainability managed by design and not re-actively as we see in our economy. The challenge for the risk industry is to move the debate from sustainability awareness to optimised sustainability leadership as in case of Unilever who went so far as to inform and convince shareholders of the sustainability business case and balance sheet, ahead of their investments.
Perhaps the time is ripe for our socio-economist and our risk experts to join forces to proactively model and change annual reports from looking forward and not overly emphasize the results of the past which are not measured against resilient sustainability performances.