Defining the Strategy of Sustainable Value Creation
The first step when defining a sustainable strategy is to define the expected outcomes. The first and most important question to be answered is about the expected business value from implementation of the sustainability action plan. In order to answer this question, one should:
(a) Align with the company strategy: Is the priority of the company to grow and to develop? To increase its margin? How is this going to be achieved? Sustainability should be used to support the company's strategic priorities.
(b) Assess stakeholders expectations: What stakeholders have an interest in sustainability and are to be involved? What is their influence on the company and its value-chain? On what type of value can they act? For example, clients will influence sales, key opinion leaders will influence brand reputation and suppliers of strategic materials can influence the level of risk.
(c) Perform a risk assessment: A sustainability strategy can be key to support the risk management plan of a company.
A meaningful strategy to unlock sustainability within an organization remains the key to link each initiative to one of the key areas of value creation. We can think at the life cycle management toolbox being at the opposite end of the value creation path within a company. Often an appropriate LCM tool (or a combination of them) is first identified, and then implemented by a business unit that is expected to generate tangible or intangible business benefits. Proceeding in such a sequence, however, is risky. Organizations might realize that generated business benefits are not aligned with company's value drivers like two ends of a tunnel being drilled from both sides that fails to meet in the middle due to poor planning.
There are potentially many good reasons to launch an ecodesign project:
• Starting from consumers expectations and perspective, developing a new packaging that is differentiated by its lower impact on the environment. But the first questions to tackle are: What does sustainability mean for the consumers? How do they perceive it? How will they react to a new packaging?
• Generating new ideas thanks to the motivation of the team to work on sustainability. It is however important to understand the expectations of the team: How do they perceive sustainability? What would they like to learn during the process? How is their work valued?
• Limiting risks by choosing appropriate materials. Which material price will be less influenced by the future price of energy? Which materials have an availability that is ensured for the coming 20 years?
The following example shows that one first needs to define the value to be created with sustainability, before launching a sustainability action.
2.1.1 The Liberté Case Study
Liberté, a dairy company based in Québec implemented in 2008 an ecodesign strategy, working on various products, but in particular on a drinkable organic yogurtbased beverage that was to be sold in a cardboard packaging. Liberté discovered through a life cycle assessment that this new packaging had a significantly lower impact on the environment than the plastic bottle traditionally found on the market.
The product, launched in 2008, was positioned as an ecodesigned product (organic milk and packaging optimized with a life cycle assessment). Unfortunately, the launch of the product was not the commercial success that the company's management had anticipated. Several reasons can be identified:
• In some cases, retailers and consumers were negatively surprised by the packaging design that was different than the industry norms for such a product. This is even though the product was sold among the organic products, where buyers are relatively well informed on sustainability issues.
• The Producteurs de lait du Québec (Milk Producers of Liberté) were subsidizing single portion dairy products with an additional premium for drinkable products packaged in a resealable plastic bottles favouring “on-the-go” consumption.
• Consumers (especially young children) were not used to the new packaging and had some difficulty opening them.
The learnings for Liberté were the following. They were able to determine hotspots linked to the environmental impacts of their product and were capable to mobilize the necessary resources and collaborate with suppliers to address them. However, although meeting the objective of a more sustainable packaging, the company failed to understand consumer's perceptions and needs. A better link between R&D and marketing needs to be established to test market perceptions in respect to these new products. This is especially true where such products counteract existing market trends, and in such cases, it is necessary to understand the likely consumer acceptance and whether consumer education or other actions need to be focussed on.
Sustainability Value Creation Framework
In order to minimize such implementation “failures”, the authors propose a sustainability value creation framework that builds on life cycle management, but ensures at the same time connectivity between the selected LCM tools and the value drivers of the company (Fig. 3.1).
The framework describes the links between life cycle management tools and value creation through different steps: toolbox, business implementation, business benefits, value drivers and business value. One proceeds from left to right by asking the question “for what purpose”, or “what do we want to achieve”. From right to left, one can ask the question “how?” The value creation framework has to be defined for each company, and in many cases, the path toward value creation might be longer and more sophisticated than what is presented in Fig. 3.1.
Although one can easily start from anywhere within the framework, addressing the two questions and clarifying the chain is the starting point to ensure the linkage between sustainability actions and business value creation for the company. In Sect. 3, several of these paths to sustainable value creation are illustrated and discussed.
Fig. 3.1 Sustainability value creation framework linking life cycle management tools with business value creation of an organization