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Sustainable innovation could be worth £100bn for UK companies

 
Rainbow Across London Skyline

The Fortune Favours the Brave report estimates sustainable goods and services in the UK now represent a pot worth £200bn. Photograph: Adrian Dennis/AFP/Getty Images

 

Powered by Guardian.co.ukThis article titled “Sustainable innovation could be worth £100bn for UK companies” was written by Oliver Balch, for guardian.co.uk on Thursday 4th July 2013 14.24 UTC

Sustainability advocates are undergoing a rethink. For decades, they’ve harangued big business about what it ought to be doing. The tactic has elicited a begrudging, heel-dragging response for the most part. Now, they are hoping that a shift in focus might just kick corporations into action.

A new study from Accenture, Business in the Community (BITC) and Marks and Spencer makes precisely this case. According to the Fortune Favours the Brave report, sustainable goods and services in the UK now represent a pot worth £200bn. UK companies that adopt sustainability practices and strategies, meanwhile, could stand to cash in on productivity gains of an additional £100bn. That’s some prize.

“We can talk about population, water, land use, energy and climate change, but that doesn’t necessarily inspire businesses to take the right action”, says Richard Gillies, director of Plan A at Marks and Spencer.

“So the motivation is creating vibrant, growing businesses that create successful economies, which is why the report stresses the prize.”

During a period of flat growth, the ‘green’ economy marks a rare chink of light. Clean technology, for instance, has seen 24% growth since the height of the financial crisis in 2008. So-called “circular economy” services, such as recycling and recovery, have grown 18% over the same period.

Where sustainable economic success differs from traditional models is on the duality of its outcomes: what Harvard management professor Michael Porters defines as “shared value”.

That’s to say, what works for business delivers for society and the environment too.

The report is littered with examples. Take a company’s workforce. Research shows that employees who volunteer in the community are twice as satisfied as those that don’t. Were UK companies to engage their workforce more, then their productivity rates would jump by an estimated 16% while employee turnover would fall by around 2%.

On the flip side, “better alignment of the commercial goals of the company and the needs of wider society” deliver social benefits too, the report maintains. In the UK, one quarter of young people between 18 and 24 are now without a job. By helping increase youth skills through apprenticeships and the like, businesses can make a tangible difference to that reality.

Model futures

Just selling the “business case” won’t cut it, though. Companies need to consider how they can readjust their business models to capture the opportunities inherent within today’s sustainability challenges, argues Harry Morrison, director of sustainability services at Accenture.

“To really capture the prize of sustainable business, you can’t just do business as usual… Successful sustainable businesses put social goals and environmental frameworks at the heart of their strategy, the heart of their engagement with strategies and the heart of their supply chains”, he argues.

That won’t happen by accident. Only through a systematic, concerted effort to revise their essential strategies and operations will companies stand a chance of tapping the potential opportunities out there. In short, they need to get innovating. The report identifies five categories where such efforts would be best spent:

• Resource efficiency: companies can generate annual savings of £61bn by scaling resource efficiency and energy efficiency initiatives and through the use of cleaner technologies.

• Circular economy: the UK consumer goods industry could save £15bn to £18bn annually by closing the loop on supply chains, extending asset life, promoting re-use and designing products for disassembly.

• New consumption models: facilitated by social media, companies like friends-based sharing platform Yerdle and accommodation service Airbnb are creating business models based on consumers collaborating with each other to re-use, share, swap or barter goods and services.

• Shared value business models: UK companies can generate costs savings of between £3bn and £29bn through reducing recruitment and building a more engaged workforce via business models that support their local communities.

• Transparency and customer engagement: manufacturers in the UK could access annual savings of £3bn, while also building customer trust and loyalty, by being clearer to consumers about product origins.

UK plc is making more headway in some areas than others. Cutting waste and energy use has always been a relatively easy sell given the direct benefits of doing so. With manufacturing productivity down from 11% in 2007 to 5% last year, companies are keener than ever to find ways of optimising their operations. Clean technologies, such as reverse osmosis to secure long-term potable water supplies or cutting-edge forms of off-grid renewable energy, are presenting new ways of achieving that goal.

Marks and Spencer provides an illustrative example. The carbon neutral UK retailer shaved £135m off its bill for inputs over the last year through measures such as cutting its clothing delivery vehicle fleet (down 25%) and improved logistics fleet management (fuel efficiency up 30%).

“The vast majority of that [£135m] is coming from the early adoption of resource efficiencies”, says Gillies. At the same time, he admits that the company is “only in the foothills” when it comes to developing new consumer-facing business models.

 

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