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Column: Kick-starting a new wave of corporate sustainability activity

by Colin Isaacs
EcoLog, 8/11/2017 11:18:00 AM

Earlier in February 2017, a headline in the National Post newspaper stated that “Canada has failed at innovation for 100 years.” A subhead went on to state that “[a] key advisor to the Trudeau government on its innovation agenda identifies inertia among Canadian firms as the biggest problem all governments have faced.” 

Many of the professionals involved in promoting the sustainability agenda in Canada would agree. Dr. Peter Nicholson — a former senior executive with Scotiabank in Toronto and with BCE Inc. in Montreal, a visiting economist in Finance Canada and a special advisor to the Secretary-general of the OECD, and a one-time advisor to former Prime Minister Paul Martin — put it well when he stated in the academic journal Canadian Public Policy that “[i]nnovative is not a prominent feature of this country’s global brand.” 

The scene will have to change, in part because of our participation in the Comprehensive Economic and Trade Agreement with the European Union (EU). This agreement will make it easier for products, including more innovative products, from Europe to access Canadian markets. Either Canadian manufacturers and producers will take a big innovation leap forward or they will fall further behind in competitiveness based on innovation, almost certainly with predictable results. 

Accenture, a leading global professional services company, has just published a report titled “Formula won: A new way to measure corporate competitiveness”, which might help propel at least some major Canadian companies out of their ruts and into the 21st century. The Accenture report notes that historically, and right up to the present time, “[t]oo many companies have one-dimensional strategies driven mainly by chasing growth or driving profit, with little (or no) focus on sustainability and trust, and no integration across the three.” In these situations, it is usually one of the first two that is dominant, with the sustainability and trust pillar never making it to the agenda. 

The Accenture report’s authors — Mark Pearson and Bill Theofilou — have developed a new index of corporate competitiveness, the Competitive Agility Index, that they assert reveals “a billion reasons (all of them dollars) why companies need to adopt an integrated strategy to sharpen their competitive agility.” By integrated strategy, they mean one which balances growth, profitability, and sustainability and trust. 

Three pillars are incorporated into the new Competitive Agility Index. The first two, growth and profitability, are incorporated into the Index using a methodology which employs available and frequently used metrics. For the sustainability and trust pillar, Accenture has developed an algorithm based on various industry-specific factors and trust indices. 

Analysis of the Competitive Agility Index results for some major corporations drew Accenture to the conclusion that “[c]ompanies that focus on driving value in growth, profitability, and sustainability and trust simultaneously have the potential to yield far greater results on revenue improvement and EBITDA [earnings before interest, tax, depreciation and amortization] than companies that focus on just one or two of the pillars.” 

Of particular interest is the information about specific companies contained in the Accenture report. Some of the highest ranked automotive and industrial companies in the Competitive Agility Index do not fare as well by the traditional measures. It is only their sustainability and trust efforts that bring them into the top rankings. 

Schneider Electric, a global company based in France, rises above competitors in its ability to anticipate changes and transform accordingly. The Spanish company, Industria de Diseño Textil, S.A. — better known as Inditex and by its major brand, Zara — is the largest global fashion retailer with more than 7,000 stores in almost 90 markets. In addition to its nimble approach to production, the company is “focused on environmental sustainability and circular economy, working on ways to reuse and/or recycle its garments, and launching sustainable clothing.” 

Daikin Industries, the world’s largest air conditioner manufacturer, makes it to number nine in the Competitive Agility Index in part because every five years it drafts a strategic management plan that leads it to undertake environmentally smart initiatives that help its expansion into new markets. 

As a final example from the Accenture report, Colgate-Palmolive, with a head office in New York, sees innovation as key to its growth but has also made a long-term commitment to sustainability with ambitious goals set for packaging recycling, reductions in water usage and greenhouse gas emissions, and helping communities in need. “In recognition of its sustainability efforts, Colgate was included in the 2014/2015 Dow Jones Sustainability North America index and was recognized as one of the 100 Best Corporate Citizens by Corporate Responsibility Magazine.” 

Since it came to prominence in the late 1980s, the concept of corporate sustainability — embracing environmental and social responsibility and leadership as well as key economic performance measures — has gained little traction in Canada. If the trade agreement with the EU and the Accenture report kick-start a new wave of corporate sustainability activity, then there is hope yet for strong growth based on sustainability initiatives in Canada’s economy and employment numbers.

Colin Isaacs is a scientist who has been advising governments and the private sector on issues such as waste reduction, reuse, recycling, stewardship, environmental management, and social responsibility since 1980. He is currently working for the CIAL Group and can be reached at (416) 410-0432 (phone); (416) 362-5231 (fax); and colin@cialgroup.com (e-mail).

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