The Executive Newsletter of TheOfficialBoard

By Peter Lacy,  Accenture

In our research and work with clients around the world, we see the challenges that many companies are facing in this difficult economy.  Management must demonstrate their ability to run day-to-day operations better than before, maintaining flawless operations despite the need to tighten belts and deal with suppliers in crisis, customers lacking in confidence and ongoing merger-integration challenges.

In this downturn, consumers don’t have the same spending power, are more price sensitive and they’ve lost trust in companies and brands. They now have a higher propensity than ever to switch.

First, consumers may have lost some spending power, but that doesn’t mean they have lost their consciences. Yes, they are cutting  back, but their values and good intentions remain.  If they are able to support their values despite the economic pressures, they do.

One of the clearest headline findings from our latest survey of over 11,000 consumers worldwide is that consumers’ level of concern over climate change has remained unaffected by the challenging economic conditions. In fact, 3 out of 4 respondents said that they’ve changed their behavior to a “great extent” or “some extent” over the past 12 months to try and reduce their individual carbon footprints.

However, consumers aren’t prepared or in a position to pay a differentiated price. This is giving rise to the ‘frustrated consumer’.

Second, This is creating an opening for savvy companies.  As companies compete for limited consumer spending, the reinforcing ‘sustainability’ message is a differentiator and a positive response to the ‘frustrated consumer’ phenomenon.  Increasingly consumers want “embedded” sustainability.  Take the following examples:

• P&G has designed its Ariel and Tide washing detergents to work at low temperatures. In 2006, Ariel started the “Turn to 30 degrees” campaign in the UK. The campaign was effective, with an increase in the number of loads washed at 30 °C moving from 2% to 17% following the campaign. This translates into about 60,000 tons of CO2 emissions saved. For consumers, this means about £50 a year saved.
• In 2008, Clorox launched its Green Works line of natural cleaning products and already this new brand has captured 42% of the market.  According to Clorox, the consumer market for natural cleaning products has doubled since its launch in 2008.
• General Electric recently announced a 21% increase in revenues from their Ecomagination offerings. With over 80 products and services in the range – they are addressing consumers’ sustainability needs in refrigerators, smart meters for the home, turbines and engines for industries.  The 80 products represent a 30% increase from the 2007 portfolio, which GE plans to bring to US$25 billion by 2010.

Conclusion: there is an opportunity to turn this position into real business value.  If you can give customers everything they traditionally want, with features like price, quality, availability and sustainability, this is the winning formula.

For an increasing number of consumers, sustainability is a benefit – and lack of it is a cost. Using sustainability as a focal point and differentiator in the economic downturn makes sense.

Peter Lacy is the Accenture Sustainability Practice lead for Europe, Latin America and Africa.

By Bruno Berthon, Accenture

Over the past five years, we’ve seen sustainability steadily move from the periphery to the heart of business. Companies have adopted sustainability practices for a host of reasons depending on the industries and geographies in which they operate. By now, it’s safe to say that most companies acknowledge that sustainability is good for business.

Today’s economic downturn, driven in large part by the frozen global credit markets, has placed an immediate premium on liquidity. As a result, companies are casting a critical eye towards all investments and initiatives, including those focused on environmental sustainability initiatives.

But high performing companies know that this isn’t the time to be shortsighted. It makes sense that amid continuing economic uncertainty companies scrutinize all investments, but not at the risk of eliminating or suspending sustainability investments because they would be viewed as superfluous.

Sustainability investments are closely aligned with critical moves companies need to make in a downturn—moves like “doing more with less”, returning to basics and investing prudently. Our research is proving that sustainability is a critical success factor for companies today and for how they set themselves up for the future. This is most visible in environmental programs that reduce emissions whilst simultaneously shrinking operating costs. To put it plainly, sustainability solutions and programs are a good proxy of high performance in companies.

Also, the key drivers of sustainability are independent of the present economic context. And they aren’t going away. The growing scarcity of natural resources will continue. So do consumer preferences for sustainable products and services. Employees are more aware of sustainability issues vis-à-vis the strategy and actions of their companies. In capital markets, we see not only more references to sustainability indexes, but also investments in sustainable technologies—demonstrating that investors still consider sustainability a wise investment option. Regulatory bodies at national, regional and global levels are not backing off. In fact, there seems to be an almost unanimous recognition among regulatory agencies to keep the pressure on.

Based on our most recent research and work, we recommend that companies follow five low-cost sustainability principles to gain an edge now:

1. Growth: Even today, there’s at least one place that companies are capturing the type of growth that the investment community craves—the growing market for sustainable products and services.
2. Profitability: More and more firms are finding that initiatives that reduce environmental effects also reduce operating costs.
3. Positioning for the future: By linking arms with stakeholders and competitors alike to showcase their sustainability actions and impact, companies can influence the direction of public debate about sustainability and prepare themselves for forthcoming environmental regulations.
4. Longevity: For companies seeking to stay current and capitalize on demand for sustainability products and services, the current downturn provides an attractive opportunity to acquire quality assets at below-market prices.
5. Consistency: Companies should make extra efforts to remain aligned with sustainability’s ongoing evolution while they attract and retain customers and boost employee engagement to ensure predictable results period after period.

It’s more important than ever to demonstrate the value of sustainability, not only for long-term success but also as a part of the effort to survive or even thrive in the downturn.

Bruno Berthon is Managing Director, Growth & Strategy at Accenture, the global management-consulting, outsourcing and technology company. Mr. Berthon is also the global lead for the Accenture Sustainability Practice.