Invested in Sustainability as a PM? You should be!

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Many executives embrace the conventional wisdom that mainstream investors care little about an organization’s performance on environmental, social, and governance (ESG) metrics. Few companies make it a priority to communicate their sustainability performance to investors, or even develop a robust story about their sustainability performance. Why should they? Investors won’t shift their investments, the thinking goes, based on a company’s ESG performance. However, a growing number of investors are paying attention to ESG performance, as evidence mounts that sustainability-related activities are material to the financial success of a company over time. Investors care more about sustainability issues than many executives believe.

This is the opening paragraph of the latest MIT/Sloan & Boston Consulting Group report, “Investing for a Sustainable Future”.  Keeping in tune with the last two posts, in which the entire principle of project managers thinking ‘too broadly’ and ‘inflating their jobs’ was raised by some critics, it was meaningful to see this report which says that investors and C-level executives (key stakeholders of projects, programs and portfolios – and often the sponsors of the projects on which project managers work) are increasingly focused on sustainability, not only for altruistic reasons but because a concentration on sustainability has shown to yield financial benefit.

Here’s a little more about the survey, for validation: The input came from over 3,000 respondents from commercial enterprises. Within this commercial sample, 579 survey respondents self-identified as investors: Most were strategic (39%), institutional (24%), or retail (11%) investors. Few identified themselves as mission-oriented or socially responsible investors – so the choice to ‘invest in ESG’ is not (only) driven by a thread of fiery environmentalism or cause, but rather, success of the enterprises in which these investors put their money.

Where’s the project connection?  Well aside from the key connection already mentioned (can anyone say “stakeholder”?), there are initiatives and projects which are themselves focused on sustainability, and they are yielding financial benefits.  Here are three examples from the report, which illustrate why this has the attention of investors – and in our opinion should have the antennae of project managers and PMOs fully up and tuned in:

  • Florida Ice & Farm Company SA, based in Costa Rica, is (an) example. In 2005, the company respondedto Costa Rica’s looming water access crisis by investing in water-saving measures. Within two years, the organization had decreased its use of water in production by an eye-popping 82%. The reduction drove down production costs and helped sustain 20% annual growth between 2010 and 2014.
  • Deerfield, Illinois-based healthcare company Baxter International Inc. estimates it earns $3 for every $1 invested in environmental initiatives.
  • Johnson & Johnson is achieving a 19% internal rate of return on its CO2 projects.

In all three cases, the benefits were realized with projects – projects that look like they were focused on environmental activism, and may indeed have been – – but the line between taking on an ESG initiative and just “taking on an initiative” is blurring, quickly.  This is why project managers need to be aware of ESG principles, and increasingly positive ESG sponsor-stakeholders.

How does an enterprise move forward to gather in more investors, now that there’s evidence that investors increasingly care about ESG?

According to the article, these are key steps:

<> Build awareness of sustainability challenges and programs — both within the company and among stakeholders, including investors.

<>  Identify and analyze material issues and create alignment within the organization to ensure an integrated response.

<> Invest in and focus on tangible and measurable sustainability outcomes instead of positions on ratings lists.

<> Formulate a strategy once tangible sustainability measures are established.

<> Incorporate the sustainability strategy into the overall corporate strategy, including a clear business case or proof of value.

<> Engage investors, and a broad range of stakeholders, to discuss the company’s sustainability strategy and progress.

Look at that list.  For one thing, aren’t most of the items in the list actually projects in and of themselves?  Yes.  As a project manager, shouldn’t your project seek to align to the strategy and higher-level portfolio/program objectives?  Of course.

So again, we feel ‘charged up’ by this report, we feel that the comments about job inflation and overstepping our bounds as project managers to be just plain wrong-minded and out-of-step with the way business is changing.  At a minimum we recommend that those who assert that the PM should stay tucked away in isolation from the value chain is not only under-utilizing the talent and capability of the PM, it is actually breaking a ‘golden thread’ all the way from investors to end-customers.  As PMs we need to be conveyors of organizational strategy and objectives, not blockers.  As I final message I suggest you read the recent post by Cornelius Fichtner, “Benefits Realisation for Project Managers”, which coincidentally came out just around the time of our two posts on job inflation.

(This post originally entered on our regular channel, People, Planet, Profits, and Projects, on projectsatwork.com – we suggest you follow that stream as we don’t blog as regularly here anymore).

Bull’s Eye

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We’ve always stressed the connection between project management and sustainability.  It’s our intersection…our “Bull’s Eye”.

And what recently caught our eye was the next in a series of great reports from MIT Sloan and the Boston Consulting Group (BCG).

Their latest effort is called The Innovation Bottom Line, and we’d like to present one small snippet of it below with some connections that we see from the broad (and critical) topic of ‘green business’ to the the specific (and even more critical and core) discipline of project management.  At least, as we see the world, project managers are core and critical.  We think most of our readers would agree, since most of them…are…project managers.

If you want to read this full report, and we suggest that you should do so, here is the link.  Just click on the image of the report, below.  You will have to sign up for a link to the PDF but it’s painless.

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And now, as promised, here is the snippet regarding the ‘bull’s eye’.

Hitting the Sustainability Bull’s-Eye

The trends are clear, and the stakes are high. Climate change, demographic
shifts and population growth are increasing the sustainability demands placed on
businesses. Our research has found that companies need not see these demands as a cost burden nor respond to them with tweaks to their businesses or “greenwashing.” Sustainability is both a business necessity and an opportunity, what PepsiCo’s Dan Bena calls the sustainability bull’s-eye. Even moderate
changes to company business models can reap significant financial rewards.

Five Practices
Our study found that many companies are generating profits from sustainability. To do so, they are following these five practices:

1. Be prepared to change business models.
Business-model innovation is a key indicator of whether a company will profit from its sustainability activities. Since business-model innovations can involve significant corporate change, organizations should address the need for and the speed of that change. Setting multiyear sustainability goals that matter needs consistent top management attention, especially if achieving the goals requires adding new capabilities and changing elements of the business model.

[[EarthPM’s comment: multiyear sustainability goals are ‘mission-vision-values-strategy’ items.  We, as project managers, are the unique resource with the capability to bring these to reality.  It is what we do.  Bull’s Eye!]]]

2. Lead from the top, and integrate the effort.

Although the momentum for sustainability efforts is often bottom-up, Sustainability-Driven Innovators lead it from the top. Executives make sure goals are set and tied to strategy. Steering committees and other coordinating groups ensure that knowledge is shared and that good ideas move systematically from pilot to rollout. Sustainability should never be a stand-alone effort. It needs to be integrated into the business and its operations with clear accountabilities.

[[[EarthPM’s comment: pilot to rollout?  Sound familiar?  Again, this is what we do!  Bull’s eye!  Sustainability should never be a stand-alone effort?  This is something we cover in our book when we talk about greenality.  Double Bull’s Eye!]]]

3. Measure and track sustainability goals and performance.

As the adage says: “If you can’t measure it, you can’t manage it.” Sustainability-Driven Innovators use scorecards, KPIs and other integrated reporting tools that track performance against goals. These measures give a clear signal that top management takes the effort seriously. In many cases, sustainability results are a key element of performance reviews and compensation.

[[[EarthPM’s comment: Peformance against goals?  Change goals to ‘baselines’, and you once again are talking about what we do as PMs.  In our book we discuss Earned Environmental Value.  Bull’s Eye!]]]

4. Understand how customers think about sustainability and what they are willing to pay for in connection with sustainable products or services.

Customers aren’t always willing to pay more for a “green” product or service. It is important to determine whether they are. In North America, LEED certified buildings have been definitively shown to
command price premiums in the real estate market. In some parts of the world, especially Europe, consumers will pay a premium for environmentally sound products. But this approach only scratches the surface of sustainability opportunities. As is the case with Dell and Kimberly-Clark, sustainability can help target and address a broad range of market and customer needs.

[[[EarthPM’s comment: customer focus…cost of greenality… enough said.  Bull’s Eye again!]]]

5. Collaborate with individuals, customers, businesses and groups beyond the boundaries of the organization.

Many companies are forming outside advisory groups to help frame their sustainability agenda. This process is an opportunity to get closer to customers, who can be a useful resource for identifying appropriate members. NGOs have become much more constructive in their corporate engagements and can help your company identify credible, meaningful and feasible sustainability objectives that lack the appearance of “greenwashing.”

[[[EarthPM’s comment: one final time, as project managers, what do we do?  What has PMI done recently to illustrate this?  Only add an entire Knowledge Area on this topic – Stakeholder Management.  Quintuple Bull’s Eye!]]]

We really do encourage you to read this report – loaded with data from real interviews with real leaders of all sorts of business leaders.  And read it from the perspective of these bull’s eyes.  Are we on target, or what?