Sustainable Industries – Lead, Compete or Comply
The most important thing to remember when benchmarking business best practice is that no two companies are the same, and what one industry might see as an important issue could be irrelevant to others. For example, financial intuitions may value understanding the carbon intensity of their investment portfolios while FMCG companies would look at sold products to understand emissions in their value chain.
Let’s look at what common factors enable industries to be sustainable and why some sectors perform better than others when it comes to environmental sustainability.
What makes an industry sustainable?
If you’d imagine for a minute that ranking companies in order of sustainability was as easy as 1-2-3, then I’d like to categories them into leaders, competitors and compliers:
Depending on the type of business you are and the sector you work in, this pyramid might take a different shape. We saw from our 2016 Sustainability Reporting Performance of the FTSE 100 research that out of the top 20 performing companies, Business to Consumer (B2C) facing organisations made up 15. Brand-reliant B2C industries such as FMCG, supermarkets and hospitality are some of the most competitive in terms of sustainability reporting. Our FTSE research showed that the lowest performing companies in these three sectors still performed higher than the remaining sectors’ lowest performers, bar one, with the lowest scoring hospitality company finishing higher than the FTSE 100 average. This isn’t to say that sustainability is immaterial to Business to Business (B2B) organisations. With many companies now trying to measure and reduce their value chain emissions, B2B companies are eager to show that they are doing their part in helping their customers meet their carbon and energy targets.
Which is the most sustainable?
The Sustainability Reporting Performance of the FTSE 100 results ranked supermarkets the best performers with the highest average score out of the 21 different industries represented on the index. They scored 5% higher than the next closest industry, Property Development & Investment and were 14% above the FTSE 100 average (see graphic below). Out of the four supermarkets listed on the index, all provide a detailed carbon reduction plan including how they plan to meet their targets and are already demonstrating emissions reductions compared to their targets. What’s more, three out of the four have put in place detailed internal behavioural change initiatives and all four are now engaging with their suppliers beyond simple procurement policies. In CDP, both Sainsbury’s and Tesco scored A ‘Leadership’, whilst M&S and Morrison’s received B ‘Management’.
Why are they the most sustainable?
For some, this might not come as much of a surprise – M&S’s ‘Plan A’ and Sainsbury’s 20×20 were among some of the pioneering sustainability strategies that have continued to develop and lead the way in terms of innovation. In our ‘3 benefits of environmental sustainability’ blog, we highlighted financial and growth opportunities as key benefits resulting from companies’ environmental sustainability approach. An intelligent approach to environmental sustainability that incorporates investor demands and sector specific ‘sustainability norms’ can help future-proof investment and engagement from shareholders.
Understanding if you lead, compete or comply is a good starting point when evaluating your responsible business approach. Our Intelligent Sustainability Benchmarking Toolkit will allow you to quickly evaluate your strategy and compare it to the leaders in your industry.
Photo by Michael D Beckwith