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ETI report launch: Business Models and Labour Standards

ETI today launched a report on business models and labour standards (see ETI’s blog on https://www.ethicaltrade.org/blog/improving-company-business-models for more information), highlighting the importance of reviewing business models in order to realise value from sustainability policies and strategies. 

While this is hardly a new or revelatory perspective, it is heartening that the ETI is bringing it to the forefront of the discussion and I hope that it could add a more business-oriented track to the CSR conversation. Whether it can attract a non-CSR audience to subsequent events remains to be seen. The ETI has a solid reputation in its field but would benefit from a strategic partnership with actors that can bring credibility and also a provide a critical voice to ensure that sessions are tailored to an audience of commercial decision-makers. Also, while CSR teams are used to the relative openness of pre-competitive gatherings, this is something that does not come naturally to those involved in business strategy decisions.

The report, which is definitely worth a read, makes a number of recommendations in four areas (“levels” in the report), focusing on investors, consumers, market competition, and model of production. Depending on what theory of change and market adaptation you subscribe to, some of these might appear somewhat fanciful. For any organisation to change the consumer mindset to one of “slow consumption” seems unrealistic, though new entrants (Nudie Jeans being held up as an example) have been able to identify and capture a large enough segment of consumers to create a profitable business. If indeed slow consumption, placing a higher value on keeping products longer and accepting paying more for quality that would allow this, turns out to have mass appeal such brands would have first-mover advantage. That would, however, depend less on an integration of existing sustainability policies and goals. Rather, it would be the result of having successfully identified a consumer value proposition that can be realised with a more sustainable business model.

And here is where the real crux lies. Would a sustainable business model grow out of the integration of an existing sustainability strategy or instead from a wholly new approach to business with an ambitious and practical attempt to measure the positive and negative impact of the business across a range of stakeholders to end up with a more holistic approach to business? It is worth bearing in mind that attempt to fundamentally change business plans is potentially a perilous endeavour and one that inevitably would have many internal detractors and obstacles–regardless of its viability or degree of conformity with traditional business norms. A model to consider is the way some companies have tried out different concepts in an isolated part of the business before rolling them out in the wider organisation.

Clearly, without a sustainable business plan sustainability plans will create limited impact. However, the sustainability teams need to lay the groundwork to build confidence in the value proposition for the business and to earn the right to be listened to in an area not traditionally seen under their purview. An iterative process of developing understandable and actionable indicators with credible and demonstrable links to underlying risk and impact is key if commercial managers are to see value in integration. Secondly, clearly defining sustainability teams as facilitators as opposed to implementors might appear to reduce impact in the short term, but will build credibility in the long-term as only the teams directly involved in operations will be scaled and funded sufficiently to manage them.

With this in mind, I hope that the ETI (and strategic partners, perhaps) will find a way of bringing the subject of business plans and sustainability to a wider audience, but also to support sustainability teams in preparing the ground for that step within their organisations.

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Organise for sustainability

Companies are facing unprecedented challenges to understand and address their social and environmental impacts. Many companies try to address all these challenges from the sustainability department, rather than sharing responsibility out to the business. What would a more effective model look like and what are its key components? 

I believe three areas are of particular interest: information exchange, competence profiles, and, organisational setup. While businesses need to align their operations more with the sustainability agenda, sustainability departments need to align themselves more with their colleagues in the commercial side to achieve a common language, information-flow, and idea-generation on all levels.

Set information free
Sustainability departments generate huge amounts of data which value risks going to waste if it doesn’t reach commercial decision-makers in a format that is understandable and actionable. It’s often better to start small and simple to demonstrate the concept. At Waitrose we developed over a few weeks an Excel application that aggregated audit information into a dashboard, providing each technical manager with the compliance status of their production sites. That it was done in a flexible format allowed us to make iterative changes to the analysis and presentation, something that would have been a lot more costly in a fully designed system.

At H&M we brought in production controllers into the sustainability department to start the process of quantifying and packaging information in a way that was adapted to how the production manager’s dashboard was constructed. This put a whole other perspective on the data that we had previously only used within the department, but was key to the business alignment process. Data needs to be in the right hands for results to happen. But even then, those hands need to know what to do with it.

Update your job descriptions 
If commercial teams are being handed more data without a clear idea of how to assess or action it, not much is gained. It stands to reason that to capitalise on your sustainability work the job descriptions and recruitment profiles need to specify a sufficient degree of competence in this area. How else would you know when individuals and teams need training? Conversely, anyone wanting to earn the right to be listened to by commercial teams need to understand the business logic and key functions of the company. It’s natural that sustainability teams, being highly specialised, are not as familiar with the commercial aspects at the outset, but job descriptions should require this to provide a clear benchmark. 
Updating your job descriptions gives you an opportunity to identify such gaps during performance reviews and also makes clear to recruiters how to evaluate candidates for your next round of hiring. Through this competence development, sustainability and commercial teams will come to share a language, helping them to solve problems closest to where they appear.

Place problems close to people
Sustainability departments are often tasked with solving the problems they identify, but the logical endpoint of that strategy is a myopic department sprawling to contain a miniature replica of the company itself. That is hardly a viable strategy. Besides, sustainability problems are business outcomes and should be treated as any other adverse result. Sustainability teams are advisers, and building the capability of the whole organisation is their key objective.

Place the problem close to right people by having the sustainability team work on creating a capable team in each business function. Organisational development should be an iterative process that provides real evidence for what works, and providing a natural cycle for re-assessment and adaptation. The organisation is never finished, this is just the current version. 

Recommendations

  • Build the minimum viable tool for presenting the most critical sustainability information to commercial decision-makers. Iterative based on feedback.
  • Update sustainability team job descriptions to require the necessary experience to understand the business logic to effectively work as advisers and facilitators.
  • Place problems close to people where the influence to affect change is the greatest.