Peter Kalish
July 12, 2023
Bridging the gap: Engaging compliance and operations in the pursuit of economically viable sustainability
Sustainability strategy is a hot topic in many companies today. But for the strategy to pay off and be successful it is crucial to engage all relevant parties and find a unified approach. This might be the biggest challenge in the process since the views of different departments can diverge greatly. In this piece, our expert Peter Kalish explains ways to bridge the gap between them.
Sustainability has become a priority for industrial companies in today’s business landscape. Senior executives, under pressure from customers and investors, are driving sustainability strategies and looking for their business leaders to find economically viable solutions. However, as organizations look to reduce their environmental impact and promote a more sustainable future, they must acknowledge and address the differing perspectives of their internal stakeholders.
Two crucial groups within the company – compliance and operations – often hold divergent views on sustainability initiatives. To achieve meaningful progress, companies must develop strategies that engage both groups and demonstrate the value of sustainability across the organization while ensuring that the economic benefits are not overlooked.
Compliance: Embracing Sustainability as a Core Value
Compliance departments within industrial companies are largely bought in on sustainability initiatives and vision. This group understands the pressing need for climate change action and the importance of adjusting business operations to achieve a more sustainable future. For them, sustainability is a moral and ethical imperative, as well as a necessary response to evolving regulations and societal expectations.
Operations: Focused on Economic Value
On the other hand, operations are primarily concerned with delivering economic value to customers and shareholders. They are measured on metrics such as production throughput, cost management, quality, uptime, and return on investment. For this group, sustainability can be viewed as a secondary concern that interferes with their primary objectives.
It’s important to acknowledge that their skepticism about sustainability initiatives can be justified when the economics aren’t viable. If sustainable solutions negatively impact growth or earnings, they will ultimately prove to be unsustainable – from a business perspective. To truly embrace sustainability, the operations team must be convinced that sustainability initiatives offer tangible economic benefits that align with their performance goals.
The Challenge: Demonstrating the Value of Sustainability to Operations
The successful integration of sustainability into a company's strategy is likely to hinge on convincing the operations team of its value. This group is not swayed by abstract arguments or lofty ideals; they require concrete evidence that sustainability initiatives can yield financial returns. When developing sustainability strategies, companies must account for these differences in perception and ensure that decision-making processes consider both the environmental and economic aspects of the proposed initiatives.
To better understand the full economic impact of sustainability solutions, all relevant economic factors need to be considered, including energy savings, avoidance of regulatory penalties, mitigation of resource scarcity risks, enhancement of brand reputation, improvements in employee retention and recruitment, and increased operational resilience. Unfortunately, tools to support this kind of analysis are still emerging, so many initial opportunities may have to be less ambitious.
Recommendations for Creating Collaboration Between Sustainability and Operations Leaders
- Develop clear and quantifiable sustainability goals: To engage the operations team, companies should establish specific, measurable sustainability objectives that can be directly tied to economic performance. This will enable the operations team to track progress and recognize the tangible benefits of sustainability initiatives.
- Communicate the economic benefits of sustainability: Companies should actively communicate the economic advantages of sustainability initiatives to the operations team. This could include presenting case studies of successful sustainability projects that have delivered both environmental and economic benefits, as well as highlighting the potential cost savings and revenue generation opportunities associated with sustainable practices. And, since risk is such a critical component of long-term sustainability, financial analytics must seek to monetize the risk implications of sustainability initiatives.
- Offer training and resources: Providing the operations team with the necessary tools and knowledge to implement sustainable practices can help alleviate any concerns about the feasibility of these initiatives. This could include offering training on new technologies, processes, and best practices that promote sustainability while also delivering economic value.
- Integrate sustainability into performance metrics: To ensure that sustainability becomes a core consideration for the operations team, companies should incorporate sustainability-related metrics into their performance evaluations. This will demonstrate the company's commitment to sustainability and incentivize the operations team to prioritize these initiatives.
- Start small: Most industrial businesses have opportunities to create small economic gains with sustainability initiatives. It’s not necessary to immediately redesign a manufacturing process or electrify all facilities that consume fossil fuels. Technologies are still emerging in the green space and the economics may not be justifiable in the near term. Focus on those areas where impact can be felt and create some early wins.
As industrial companies navigate the complex landscape of sustainability, it is essential that they address varying perspectives within their organization. By acknowledging the perspectives and concerns of both compliance and operations teams, companies can create a more unified approach to sustainability.
And, for the impact to last, organizations must go beyond merely presenting the benefits of sustainability. They should foster a culture of continuous learning and collaboration, where sustainability is viewed less as a destination and more as a way of doing business. The time has come for industrial companies to create a shared vision of a sustainable future that also achieves business objectives resulting in long term economic viability.
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Peter Kalish
Principal
+1 518-948-0567