Posts

Iceland has announced that it will become the first major UK supermarket to end the use of palm oil in its own-brand products. Boldly, Iceland says it wants to ‘demonstrate to the food industry that it is possible to reduce the demand for palm oil while seeking solutions that do not destroy the world’s rainforest’. But this has been attacked by the Council of Palm Oil Producing Countries, who say that the alternatives have worse impacts. Many retailers have already committed to sustainable palm oil use, but what difference are they making – and will avoiding it altogether end up causing negative impacts elsewhere in the supply chain?

The problem with palm oil is that it is such a useful, and cheap, product. It is found in many food products as well as other retail goods such as cosmetic products. Having exploded in popularity with manufacturers since the 1980s, it is now used in everything from detergent to chocolate, and can be found in up to half of the items sold in UK supermarkets.

To meet this huge, and still growing, demand, an increasing amount of land is set aside for palm tree plantations – mostly in Indonesia and Malaysia. To make room, rainforest is cleared – often by simply being burnt. This releases the huge amounts of carbon stored by the forests into the atmosphere, contributing to global climate change (and leading to those countries becoming some of the world’s biggest greenhouse gas emitters). Losing these ecosystems also harms local biodiversity, leaving species such as orangutans critically endangered.

The Roundtable on Sustainable Palm Oil (RSPO) was founded to stop those impacts, while fostering good outcomes for the communities close to palm oil plantations. Its view is that palm oil is an essential and irreplaceable commodity. Growing sufficient crops of alternative vegetable oil sources to meet demand would have similarly negative impacts (and indeed palm oil has a higher yield than other options, so can deliver more per unit area of agricultural land). It advocates less environmentally harmful palm oil production through certification, requiring producers to prove they meet various criteria – including avoiding clearance of forests or fragile ecosystems.

Many well-known brands, including the major UK supermarkets, have signed up to the RSPO and committed to using 100% certified sustainable palm oil (CSPO) in their own brands. However, lots of the products we buy are manufactured by organisations that have not made these commitments, and WWF scorecards show that many organisations aren’t doing enough. Nestlé in particular has faced high profile criticism for missing targets and moving goalposts.

Palm oil can also be used as a biofuel, producing lower greenhouse gas emissions throughout its lifetime than traditional fuels. Blending it with diesel brings down the carbon intensity of the product; however, this ignores any emissions or environmental damage caused by clearing the land to enable production. Initiatives to promote palm oil as a biofuel in the past have been blamed for triggering some of the worst instances of forest-burning. Recognising this, the EU parliament this year agreed to phase out the use of palm oil as a transport fuel by 2021.

Finding replacements for palm oil is a huge task, but if a business can find alternatives that really are more sustainable, and are not sourced in similarly destructive circumstances, it could force its rivals and product manufacturers to adopt a similar approach. Together with moves to take it out of the transport fuel supply chain, there is the potential to substantially curb demand. However, palm oil’s versatility and status as a commodity means that only global momentum from many different sectors can stop its continued growth. Industry buyers need to demand proof of crop sustainability, growers must increase participation in certification schemes, and opportunities for continual improvement in resource efficiency should be explored.

Connections with both public and private clients would bridge the gap between addressing the lack of infrastructure, a long-term solution and short-term fixes.

Despite significant environmental progress in 2017, this year has started with a significant threat: the waste import ban in China. The ban, which came into effect on the first of January, restricts the imports into China of 24 kinds of recyclable and solid waste and thus has a wide variety of potential consequences. These restrictions have been put in place to protect the Chinese market for recycled plastic by allowing China to use its own recyclable waste.

For two decades the UK waste industry has relied on sending plastics abroad for recycling with up to 500,000 tonnes of plastic shipped to China each year, thus the impact of this ban on UK capacity for managing plastic recyclables, in particular, will be strong.

In the face of this new ban, plastics are already beginning to pile up. Despite this concern, the Environment Secretary Michael Gove has admitted he has “not given it sufficient thought”. With mounting waste and inadequate preparation there are certainly risks. But adaptation could lead to opportunities for organisations from both long-term infrastructure improvements across the UK, but also short-to-medium-term in waste management design.

Despite having warning of this ban from China since summer 2017, short-term solutions have not been considered by the UK government. A fundamental change in the behaviour from government, manufacturing companies and consumers will be necessary in order to assist in the reduction of plastic waste and to create a sustainable long-term solution for waste management. Mary Creagh MP, chair of the Environmental Audit Committee, has warned the ban could mean “a double whammy for council tax payers” if the price of exported waste falls and the cost of UK disposal rises. She has also called on the government to deliver investment to provide more reprocessing facilities “to reuse these valuable materials, create green jobs and prevent plastic and paper pollution.”

Organisations generating significant amounts of plastics, including shopping centres and manufacturing facilities have been able to generate a revenue stream from the segregation and selling of the materials to reprocessors. The ban has placed a stop on this practice and will impact upon the revenue being generated. Virgin plastics, those made from non-recycled plastic, fetch over £1000 per tonne, and items made from previously recycled plastic can still turn a profit at up to
£400 per tonne, so the potential financial loss is significant.

The appetite for action on this is clear, and any organisation acting on this puts themselves ahead of the field both commercially and in promoting their successes.

Building on existing momentum, ranging from the tagline for the 2017 BEIS Industrial Strategy “Building a Britain fit for the future” to the outcry after Blue Planet II aired footage of marine pollution – by which Michael Gove was “haunted”. The appetite for action on this is clear, and any organisation acting on this puts themselves ahead of the field both commercially and in promoting their successes.

Facilities management companies may look vulnerable to this issue; however, they are also uniquely positioned to find a circular economy solution. As a pivotal point between their clients – creators of waste – and final waste management points, FM has an opportunity to meaningfully inform the adaptation direction for this and lead on the best practice to build sustainable solutions. The industry possesses revealing data on nuances of waste management from a consumer perspective.

Connections with both public and private clients would bridge the gap between the government addressing the lack of infrastructure in this area, a long-term solution, and those finding the short-term fixes.

The 25 Year Environment Plan, published last week, committed to “zero avoidable plastic waste by 2042” by tackling the production and waste management phases of the plastics lifecycle. Some, including Green Party MP Caroline Lucas and EIA Executive Director Matthew Farrow, have pointed out that the plans are ambitious but vague, and for the moment this document is not legislation and so is largely unprotected. It will be up to the Government to prove it can walk as well as it talks. Inaction in the face of mounting plastic waste will bring innumerate potential risks – many of them we are likely not aware of yet.

Quantifying the unquantifiable in sustainability

Sustainability measurement is important because it enables us to understand the environmental burdens of our actions, set targets to reduce this and monitor our progress in these endeavours. We use a variety of measures: fuel consumption, diversity metrics, waste to landfill, etc. Yet there are markers of sustainability that are not so easily quantified, and for these our measurement, and the subsequent benefits, are significantly limited.

These ‘unquantifiables’ occur across the triple bottom line so impact our understanding of every sustainability theme. Examples include the measurement of collaborations – how do you quantify the benefit of knowledge sharing, cooperation and countless other impacts of collaborative working? Or diversity – the value of having a breadth of experience and perspective on a project?

Where we are now?

The current state of affairs is varied. Certain characteristics, particularly those more closely aligned with the strategic success and profitability of a company, are often clearly measured across sectors with depth of understanding to back up the numbers. However, those areas with less obvious links to traditional ideas of business success have often had less invested in their measurement. This is likely due to the perceptions of those involved: perceived unimportance and lack of understanding in how the metrics fit into the classic corporate landscape, or perceived difficulty of the task leading to deferment.

Benchmarking organisations such as the CDP, DJSI and FTSE4Good rely on quantifications of sustainability. Quite often there are internal processes, such as supplier surveys, which require evidence for ‘scoring’ purposes, but the processes by which a policy or conversation is converted into a ‘score’ on which an organisation is then judged is largely unclear. Neither the processes or evidence are shared with others in their industry or field, so there are silos of potentially good measurements and metrics however no way to access or learn from the best practice.

What are we trying?

Ernst & Young have developed a technique that quantifies sustainability across ESG themes called Sustainable Value Added. This model calculates the CSR benefits of a given action in the ESG and economic outlays of that action and the overall opportunity costs of all actions in the context of general economic landscape in a numerate method of adding gain and subtracting loss/harm. The direct link between sustainability and financials in this method holds potential from which FM sustainability measurement could draw to illustrate the business case of sustainability initiatives. This method would help develop a culture in which the financial benefits of SFM are quantitively represented therefore more recognised and acted on.

The problem with tying ESG ‘unquantifiables’ to their financial metrics is that the true benefits of them may not be as intrinsically linked to their financial benefits as this method assumes. For example, increasing the apprenticeship offering, or gearing it specifically towards disadvantaged groups, not only provides workforce but social mobility within that community. This social mobility, and the other benefits unmentioned, would be unmeasured in the EY method, yet is a key societal gain from the apprenticeship and an important metric for the sustainability offering of that company.

What next?

In order to fully understand our progress when improving sustainability, we must be confident in our measurement of it. There is a clear appetite for quantitative measurement of sustainability in corporations – especially when these metrics are tied to financials. Companies are already judged on their performance and quantified in their brand, so the knowledge must exist; but barriers also exist that create silos of this knowledge. Making quantifiable sense of qualitative data is inherently difficult, but knowledge sharing and a commitment to improvement can make a vast difference in improving our measurement capabilities.

Both client and provider must invest in a long-term relationship to truly harness the potential of timely and specialist support.

While environmental requirements on companies – due diligence, transparency and performance progress – have increased over the last decade, environmental team sizes have rarely recovered from the contraction experienced during the recession. Beyond the sheer weight of the environmental workload, CR managers are increasingly finding that the diversity of skills needed to satisfy the requirements is rare to find contained solely within one team. Outsourcing some or all of the environmental functions is becoming more popular. But to be truly effective, long-term relationships are needed.

The sole “environment manager” within large corporates in the late 1990s – often tasked with an array of activities including health and safety, supply chain management, environmental management, social impact management, communications (if the company engaged in this), quality and community giving – began to be replaced in the early 2000s by a larger team, with more specialised roles.

Even so, the increasing external reporting requirements on large corporates – including the various rankings and the need to produce a complete CR report each year – effectively shut down progress on performance for around three months each year unless data collection and copywriting was outsourced, as well as verification. CDP, DJSI, FTSE4Good and GRI amongst others led to a fundamental shift by connecting the investment and fund bodies with environmental performance data. As reporting requirements became stringent – and a clearer picture of ‘best practice’ more prescribed – some companies struggled to keep up with the new imperatives, now with the additional impetus of potential investor sanctions. Additionally, stand-alone research pieces were commonly commissioned from consultancies, often focussed on a defined issue affecting strategy and frequently inspired by the latest ranking requirements.

Compliance and due diligence obligations also increased over this period, led initially by regulatory pressures and financial penalties, particularly in the US. Overall, outsourced support in this period tended to be piecemeal, with providers called on occasionally on a task-by-task-basis and changed frequently, without investment in a long-term relationship or a deep understanding of the company culture.

As reporting requirements became stringent – and a clearer picture of ‘best practice’ more prescribed – some companies struggled to keep up with the new imperatives,

The economic turmoil of the past decade saw environmental teams cut and a retrenchment in Government policy globally on green issues – but emerging from this came incentives for companies to promote their environmental and social credentials directly – particularly to a new generation more interested in social value, hungry for transparency and well acquainted with the new tools with which that need could be satisfied.

What does this mean for today and the future? Certainly, we can expect that the need for transparency will continue to play a stronger role in environmental progress than compliance alone. For a generation well-schooled in sustainability matters and sceptical of regulatory effectiveness, environmental performance inherently includes aspects of social value, well-being, and value chain impacts.

The skill sets required to deliver this change are becoming more complex requiring a mixture of change management, data analysis, strategic insight, in-depth and targeted two way communications, and operational management. The reporting calendar is still a huge influence, meaning different skills sets continue to be emphasised at different times of the year.

Outsourced environmental teams can provide the right kind of technical support for the time of the year, and give a pool of specialist skills to be dipped in to when necessary. To truly harness the power of an outsourced team – to truly have a ‘team’ – the provider needs to be able to invest in a long-term relationship with the client and become well-versed in the company culture, with their own internal network. Only then can they work semiautonomously, and ensure their work becomes business-as-usual within the client company rather than the dreaded report-gathering-dust-on-a-shelf.

Conclusion

Outsourcing isn’t for everyone and shouldn’t be seen as a panacea to achieve higher rankings scores and deliver better results – the outsourced parties still need to work within the bounds of the strategic direction that can ultimately only be set by the company. If a company is willing to invest in a long-term relationship and truly immerses the provider within the day-today running, an outsourced team can become an invaluable pool of insight and workforce in the face of shifting priorities and constrained resources.

Portfolio Items