Kevin James on leadership

The past three years have got to be three of the toughest and most volatile years in our commercial history with rising input costs, increased levels of compliance, resource scarcity and overall global financial and political uncertainty being the only things that remain certain.

The global economic recession has been relentless and doesn’t seem to be letting up. The world is waiting with baited breath as the USA, Portugal, Greece, Ireland and other developed economies teeter on the brink of economic collapse.

Despite this doom and gloom there is a bright, green light that shines. Over the same period, the environmental products and services industry (the green collar sector) has been steadily growing both in terms of business and job opportunities. In fact the sector has been dubbed by many in the USA and UK as “recession proof”.  In recognition of this, the subject has been elevated up the boardroom agenda as well as the ranks of the corporate hierarchy of companies, globally.

This is very exciting as over the last five years, among the countless companies that we have worked with, responsibility for environmental management is like a hot potato that gets bounced around from department to department.

For example, a marketing -manager may deal with it because it is seen as an opportunity for differentiation and a lead up to a uber PR campaign (read short term green wash). Perhaps the SHEQ people are lumbered with it because environmental non-compliance is regarded as a risk management issue and yet another box ticking exercise. Facilities managers get given it when the goal is to drive efficiency and save money. In fact every time we go into a meeting with a company for the first time, we have a reasonable idea of their objectives depending on who we are about to meet.

It is however, when we deal directly with the CEO or MD of a corporation that it gets really interesting. More often than not in these cases, things move a lot faster and with less resistance.  In fact, we find ourselves dealing with more and more people with C in their titles as they come to the realisation that quite soon, their business success will not only be a function of their financial mastery, but will be intimately linked to their company’s environmental and social performance and decisions will start to be made based on their performance in these areas.

It seems that CEOs are starting to get it. Embarking on a holistic and fully integrated environmental program makes perfect business sense no matter what type of business you are in. Besides it being the right thing to do in terms of rectifying the environmental imbalances that exists; Investment in this space ticks all the boxes of a classic business strategy where all returns can be measured and all investment can contribute positively to the value of the enterprise through increased revenue generation, cost efficiencies and brand equity as well as effective risk management.

It is for this reason that companies are taking this as seriously as they are, placing it ahead of other strategies and innovations. According to a recent Calvert stud, 65% of all Standard and Poor 100 Company’s have board of director environmental management committees dedicated to the implementation of environmental programs. In each instance, these groups have been given a clear and strong mandate from management to integrate these green business models into the company’s core activities.

In terms of timing, there is no better time than now. Based on our observations of the corporate sustainability market in South Africa and the imminent introduction of punitive legislation as well tighter and more consistent sustainability indices, we are clearly past the “innovators” stage and onto the “early adopters” or even the “early majority” of adoption of these new innovations.

What does this mean?  Put simply, this means that while the green economy is gaining momentum exponentially; it is yet to achieve critical mass, which means that still only a minority of corporate consumers would currently pay a premium for any alternative green product and services without a significant and measurable return on the other side.

Furthermore if a company is to stand any chance of competing in this new paradigm, investment into innovation needs to not only be secured, but bolstered. During tough times, it is common for companies to focus on what is secure and bankable and strengthening their core business is normally the thing that makes the most sense to most in the short term. In these cases, innovation is generally the loser. Working closely with some of the largest companies, it is encouraging to see how many are actually cranking up their investment into green innovation as they realise that their growth and ultimately their survival, depends on it.

What is critical however is to ensure that normal business principles are applied?  Of particular importance is to ensure that systems are implemented to accurately monitor baselines as well as the ongoing environmental and financial performance of any environmental program. Effective monitoring provides proof of performance to justify further investment into the strategy. It also supports reliable and meaningful integrated reporting and the establishment of a clear return on investment as well as an insight into the opportunity cost of the initiative.

For the most however, while everyone wants to do the right thing, the thing that you would think would be the biggest driver above all would be the moral imperative. We have already seen this not to be true among our political and diplomatic leaders who are year in and year out finding it increasingly challenging to reach agreements to stabilise the planets climatic systems. In the absence of bold and courageous political will and leadership, we are encouraged to see that businesses are starting to fill this leadership gap as they become increasingly conscious about the sustainability challenges facing our species on this planet and their own organisations contribution to this.

The fact remains that while executives debate whether this is good business or not, we are on collision course with our planet. Our population of our species is set to double to 13.6b people in the next 70 years and our natural resources (including water, energy) will dwindle with the cost of all commodities rising at an ever increasing pace. It’s not magic; it’s just a law of economics! The message:  Given that ALL company’s (and economies) contribute to the problem, yet aspire to achieve double digit annual growth in perpetuity, urgent intervention is required.

One such business leader, who is not waiting around to take action, is Avis SA CEO, Wayne Duvenage who drives their company’s “green journey”. He has made it clear from the start that Avis’s focus on environmental sustainability was first and foremost based on a moral obligation to do the right thing.

He is the first to admit however that the by-product of their strategy has been to unlock significant business value through cost reductions, increased market share and enhanced brand reputation and that they have positioned themselves favourably in the eyes of both individual and corporate clientele alike. Avis SA enjoys the biggest share of the South African car rental market and Duvenage believes that their focus on environmental issues is part of their strategy to ensure that this is protected, if not extended.

On winning a 2011 Climate Change Leadership Awards earlier this year, Duvenage commented “An extremely valuable spin-off of these green initiatives is that we have gained remarkable new insights into our operations and have been able to reduce waste and increase efficiencies substantially. It is a journey we urge all business’s to embark on, not only for the sake of our environment, but for the benefit of their profitability, productivity, efficiency and ultimately their survival.”

Wayne Duvenage is part of an elite group of South African business leader that gets it and understands the urgency and seriousness of the situation to respond to these pressing issues both from a moral as well as a commercial perspective. As the first in a series of online audio podcasts, this month, we interview him to get his perspective on the Avis Green journey as well as the car rental sector.

GCX will be publishing a CEO podcast every month going forward to promote environmental leadership across corporate South Africa.

Kevin James, CEO Global Carbon Exchange