Corporate strategy Study business. The company aimed to fully mitigate
all impacts of its development activity, in the belief that they would raise standards and drive the market, ultimately to create a position as market leader and consequently generate more business. We have found a number of situations where sustainability has been a deciding factor in the purchasing decision. Where other criteria are equal, sustainability may be seen as an opportu- nity to differentiate a business and its products and services to gain competitive advantage. Gazeley is now offering a basic eco building at no extra cost, with an additional menu of value- adding options, each with a business case. For one percent uplift in the capital investment cost, the company is now able to deliver up to 40% reduction in annual operational costs for its customers. “When investors and customers experience 40% reductions in carbon, energy use and operation cost, what is there not to like about this?” says Jonathon Fenton Jones, the company’s director of sustainability and global procurement.
Major reductions in energy use and emissions of 30-40% are highly achievable with the technologies already available, but this often requires a range of approaches to be deployed, depending on the context. Gazeley applies a three-tiered approach, firstly improving the energy efficiency of its buildings, then looking for energy efficient plant and equipment, followed by an optimal mix of renewable ener- gy solutions, including biomass, solar PV, and wind turbine schemes. The key principle is to reduce the energy requirement as far as possible before looking at alternative sources of energy. For Apollo Motor Group, reducing new parts and using new infrared drying technologies reduced its energy requirement by 34%, saving the business around £77,000 a year in energy costs. Kingspan Insulation installed a combined heat and power plant at one of its manufactur- ing sites. Some teething problems were experienced initially, but the benefits are now starting to flow.
Waste not, want not To echo a previous point, and in addition to the issues of resource efficiency, every tonne of waste means unnecessary cost. Landfill tax is currently at £48 a tonne and, with the recent emergency budget, is set to continue rising by £8 a tonne each year until at least 2014. It is reassuring to know that businesses like Gazeley are able to reduce their construction waste to landfill by 75%. Going further, a central theme in Apollo Motor Group’s approach is the integration of new technologies within an old philosophy, moving away from the throw away culture that has emerged in the last 30 years, back to one of ‘make do and mend’. This new approach
38 | Sustainable Business | August/September 2010
Clockwise from left: Gazeley’s ‘outstanding’ industrial building development at Chatterley Valley; the CHP plant at Pembridge; electric vehicles have lower running costs but higher capital costs
enables the company to significantly increase the number of repairs undertaken, saving over 50,000 parts a year. This, of course, generates huge savings and a significant reduction in waste. The beauty of the approach here is that by spending less money on resources and waste, the company has actually saved the jobs of 13% of its workforce. “We have completely re-focused our business,” says Graham Eyles, Apollo’s manag- ing director. The implications of this thinking for business and the wider economy are mas- sive, especially in the face of the prevailing economic challenge.
Collaboration is key Working with the supply chain is seen as absolutely critical in delivering a full impact and optimising benefits. This is perhaps not too surprising when one thinks about the significant level of activity that occurs within the supply chains of many businesses. Gazeley established ‘Expert Networks’ of suppliers, each group focused on delivering specific innovations. Apollo Motor Group also worked in collabora- tion with Aviva, one of its key clients, as well as its technology suppliers. For this to work to best effect it is important to have the right supportive commercial relationships in place; innovation is likely to be delivered if there is insufficient reward or incentive.
All of these case studies demonstrate positive business cases for change. The levels of invest- ment are usually fairly modest, all delivering payback within the usual expectations for each business. There are some occasions, however, where the initial business case doesn’t quite work. Wilson James, a leading provider of logis-
tics services in the construction sector, found this challenge when considering the use of electric vehicles. Running costs are 75% lower than with comparable conventional vehicles, but the capital cost is currently prohibitive and capacity significantly restricted by battery size. Although this investment may not work for them today, they will keep pace with the continuing technology and commercial improvements and anticipate this solution could be viable for them within two or three years. We have found that integrating sustainability principles has enabled significant benefits to be experienced by a range of businesses, their customers and suppliers. Operational cost reduction in the range of 8-40%, profitability increased, in some cases with margins doubled. An increase in sales and market share is being experienced by a number of businesses, as a result of major increases in customer satisfac- tion and net promoter scores. In other cases it is too early to establish the long-term impact on profitability and shareholder return, in part due to the downturn in demand experienced in the current economic climate.
Four words seem to sum up the whole approach: fortune favours the brave. For the companies prepared to stick their necks out, even in a difficult market, to integrate sustain- ability principles and invest in a measured way, they are very likely to emerge as leaner, greener, more attractive businesses of the future.
Michael Townsend is CEO of Earthshine Solutions >
earthshinesolutions.com. For more information on the global research project and the case studies visit
www.globalsustainablebusiness.org
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