Five trends in sustainable business for 2015

At the Carbon Trust our team of expert consultants work across a wide range of sectors, supporting businesses in reducing their environmental impact, using resources more efficiently, and taking advantage of the opportunities arising in a sustainable, low carbon economy.

Recent work has uncovered key trends in some of the areas of environmental sustainability where large companies are focusing their efforts or expressing new ambitions. As 2014 comes to a close, I have picked out five trends that we expect to rise up the corporate sustainability agenda in the coming year.

(1) Updating sustainability targets

When I started working at the Carbon Trust ten years ago most executives didn’t talk much about carbon footprints or resource efficiency. In many cases the companies they worked for had no public sustainability targets whatsoever.

Sustainability has moved a long way forward over the last decade. The majority of large multinational companies now have public targets. And 2015 is a landmark year, a year many companies chose for achieving their first sets of targets. In fact in 2015 there are 17 companies in the FTSE 100 that will be held to account for meeting the targets that they themselves set for cutting carbon.

Alongside this the profile and awareness of other environmental issues has grown, for example deforestation caused by palm oil production, or damage to bee populations. Companies are now held to be far more responsible for the actions of their supply chains and their customers. This means that a number of companies are now looking to update, expand or upgrade their targets.

(2) Supply chain engagement

Saving money and reducing waste through a focus on energy and resource efficiency within its own operations is a very valuable exercise for any company.  The business case is often unarguable and there are many proven examples. For many businesses doing the same across their supply chains offers greater potential rewards, but comes with a lot more complexity.

Greater access to data and advanced software platforms are currently helping to give businesses the smart tools that they need to take action on supply chain sustainability, addressing opportunities and risks. This is helping them to hotspot areas of inefficiency, find new cost savings, and work collaboratively on mutually advantageous situations where both the business and its suppliers derive benefit.

We are working with a number of companies helping them to understand their opportunities in supply chain engagement. For example, we helped Tesco to use its scale for good by trialling a Buying Club which helps suppliers collectively procure cheaper and trusted energy efficient lighting.

(3) Managing water risk

Water is one of those issues where a responsible business really does need to think globally and act locally. Water risk can be very serious issue, but the nature of that risk changes depending upon regional and local conditions and business operations.

Flooding causes massive disruption, including damage to sites, disruption of logistics, and preventing customers from accessing businesses. Water scarcity can impact on agriculture, manufacturing and energy production, where water is a key input. Polluting or over-exploiting a local community’s water resource can immediately end a company’s licence to operate, as Coca-Cola found out in India, or as a number of manufacturers have discovered in China.

As increasing strain is being put on our finite water resources, and some of the impacts of climate change are starting to be felt, businesses will need to take action to better understand and mitigate their water risk. We are currently working with the likes of GlaxoSmithKline to help them build tools to assess this.

(4) Exploring business model innovation

No business wants to be the next Kodak or Blockbuster. Getting left behind as world changes around them. Desperately trying to cling onto a redundant business model that once brought roaring profits. Watching as their company declines despite their best efforts.

Innovation can very quickly disrupt markets. There are enormous rewards on offer for the businesses or entrepreneurs that find a way to meet wants or needs in a more effective and efficient way. And as environmental problems become more acute and resources more scarce, then there is a huge opportunity in finding a way to create and deliver more sustainable products and services.

Improving technology is driving change. We are seeing significant growth in a number of areas: the peer-to-peer sharing economy; providing assets that would once be owned by a company – such as lighting - as managed services; and opportunities in radical production efficiencies or remanufacturing. Businesses are sitting up and taking notice of the opportunities and risks that this shift is bringing.

(5) Greening consumer behaviour

Typically a business that has made a strong commitment to reducing its environmental impact will have made significant improvements in the efficiency of its own operations, reasonable progress in engaging and greening its supply chain, and have really struggled to change consumer behaviour. This is because it is very difficult to do and takes a long time to get right.

For example, a business selling soaps and shampoos will recognise that the majority of the energy and water use related to its products comes from people using the products to bathe. But it isn’t easy to use the free space on a bottle of shampoo, or a shampoo advert, or a sign in a supermarket, to convince people to take a quicker shower.

Despite this challenge, techniques and innovations are currently being pioneered to crack one of the toughest nuts in sustainability. As awareness of these methods increases, and success stories set examples across industries, we expect to see more businesses start to take meaningful action in consumer behaviour change.