CASE EXAMPLES

The Italian multinational Pirelli is known for its high-end, luxury-brand performance tires. The company is the world’s fifth-largest tire manufacturer with a presence in over 160 countries, including 19 manufacturing sites, and a network of approximately 10,000 distributors and retailers.

Customers, particularly those in the luxury market, have been slow to embrace the benefits of sustainability features in the product. Yet the company forecasts that its market will increasingly be shaped by:

  • Macroeconomic uncertainty: “downside risks will dominate the world economic outlook”
  • Regulatory constraints: “strong move to low-carbon economies”
  • Changes in social behavior: “demographic changes, aging population, virtual mobility, continued urbanization”

In this context the company has defined a year 2020 vision to be a sustainable company meaning it will be “smart, efficient, profitable, innovation-driven accountable and engaged to its stakeholders.” To meet this vision Pirelli has designed a 2013-17 integrated “industrial and sustainability plan.” Sustainability is viewed as a driver of core business outcomes and vice-versa.

The sustainability approach needs to demonstrate a return on capital invested across the three core pillars of Pirelli’s strategy:

  • Governance & risk management;
  • Growth; and
  • Productivity.

With regard to sustainability’s support for governance and risk management, the company took several steps in its planning process. First, the sustainability team linked to the company’s Enterprise Risk Management (ERM) process. Second, they reviewed priority enterprise risks. Third, they assessed the sustainability topics with the greatest potential to affect enterprise risks.

Finally, they defined sustainability goals that would help support ERM. Examples include:

  • A rolling resistance reduction that in the Car segment will reach -40% in 2020 as compared with 2007.
  • A reduction by 90% in the workplace accident frequency rate by 2020 compared to 2009 figure.
  • Keeping research and development spending for premium products at 7% of net premium products sales, with the aim to further develop and increase premium products safety while lowering environmental impact.
  • Growing investment in risk mitigation and prevention of business interruption
  • Adoption of increasingly advanced models for management of economic, social, and environmental responsibility in the supply chain, in view of shared development.

Sources for the Pirelli example come from the “Pirelli 2013 – 2017 Industrial Plan: Sustainability Plan 2013-2017 with Selected Targets for 2020” found at http://pid2013.iwebcasting.it/assets/files/sustainability.pdf; and the Pirelli 2013 Sustainability Report.

As of publication Lockheed Martin was in the midst of a CEO-led effort to position sustainability as a key element of the company’s business strategy. Lockheed Martin is one of the world’s largest aerospace and security companies. The company employs 112,000 people worldwide. The majority of its revenues come from military sales. It operates in five business segments: Aeronautics, Information Systems & Global Solutions, Missile and Fire Control, Mission Systems and Training, and Space Systems. Its main customer is the US government. Additional customers include foreign governments, and commercial and other contracts.

Marillyn Hewson, President and Chief Executive Officer, has made a commitment to incorporate sustainability messages in her presentations to investors and other stakeholders. Where some companies list the highlights of their sustainability reports to investors, Hewson takes steps to clearly specify how sustainability is vital for the company’s current and future success. In doing so, she explains why sustainability is a priority in terms that investors will understand and ties sustainability to financial and wider business value creation.

For example, Hewson:

Emphasizes how sustainability embeds into the company’s core messages and branding related to:

  • “Delivering Innovative Solutions for Today’s Global Challenges”
  • “Engineering a Better Tomorrow”

Links sustainability into core “megatrends” that will shape the future opportunities and risks the company must navigate:

  • The rise of digital technology and the risk associated with the increasingly connected world (which the company makes the case for being a sustainability challenge in its 2014 Sustainability Report)
  • Growing population and its demands on Earth’s resources
  • Economic uncertainty and how that influences the decisions and priorities of customers

Features products designed to respond to sustainability challenges such as:

  • Environmental monitoring
  • Renewable energy (ocean thermal)
  • Energy efficiency solutions
  • Health solutions
  • Food security solutions

Source: http://lockheedmartin.com/us/news/speeches/021815-hewson.html

Unilever is a British–Dutch multinational consumer goods company co-headquartered in Rotterdam, Netherlands, and London and is one of the world’s largest consumer goods companies. Its products are available in nearly 180 countries. Unilever is organized into four main divisions: Foods, Refreshment (beverages and ice cream), Home Care, and Personal Care. Unilever owns over 400 brands, but focuses on 14 brands with sales of over 1 billion euros – Axe/Lynx, Dove, Omo, Becel/Flora, Heartbrand ice creams, Hellmann’s, Knorr, Lipton, Lux, Magnum, Rama, Rexona, Sunsilk, and Surf.

Under the leadership of Unilever CEO Paul Polman, the company has made a commitment to put sustainable and equitable growth at the heart of its business model. The Sustainable Living Plan is designed to drive increased sales while reducing costs and risks. Unilever’s ambition is captured by a bold vision for the company to double the size of its business, while reducing its environmental footprint and increasing its positive social impact.

To meet this vision, the company has set three stretch goals for 2020:

  • Help more than a billion people improve their health and well-being;
  • Halve the environmental footprint of its products; and
  • Source 100% of its agricultural raw materials sustainability.

In 2011 Unilever combined its marketing, social responsibility, and communications teams into one department where social good forms the backbone of marketing efforts. Before that, Chief Marketing Officer Keith Weed says, “Marketing people felt they were being held back by our sustainability challenge and that it took their eyes off the ball of growing their brands. On the other hand, the sustainability people thought marketing was part of the problem and would never take them seriously.” Weed sees social purpose and sustainability as the same as marketing rather than having separate missions.

Along with the parent company, each of Unilever’s product divisions is charged with adding social purpose to its brand positioning. For example the first TV ad for the corporate brand, called “Bright Future Speeches,” puts Martin Luther King Jr. and Mahatma Gandhi side by side with young people giving impassioned speeches about fighting child hunger. The ad promotes Unilever’s Project Sunlight, an online hub of social programs benefiting children that works in concert with the charity Feeding America. The spot closes with the Unilever “U” and the logos of Lipton, Knorr, Hellmann’s, Suave, and Dove. The effort relates to an emerging strategy to deepen the connection of customers in CR activities. More than 2 billion customers in 178 countries use a Unilever product on any given day. Therefore, the company states, small everyday customer actions can add up to a big difference. Unilever sums it up with this equation:

“Unilever brands x small everyday events x billions of consumers = big difference.”

By the end of 2012 sales had grown from 40 billion euros in 2008 to 51 billion euros, an increase of 26%. Over the last three years, Unilever saw a 10 percent annual increase in sales among those brands.

For example:

  • Lifebuoy has reached 119 million people since 2010 with its handwashing behavior change program and achieved double digit sales growth.
  • Concentrated and compacted laundry detergent which cuts CO2 by up to half have doubled in sales.
  • Signal’s brush day and night health campaign has reached 49 million people so far and helped sales grow by 22%.
  • Dry shampoos, such as TRESemme and Dove, which result in 90% less greenhouse gas emissions compared to washing hair in heated water, grew by 19% in 2012.
  • Calorie-controlled Max and Paddle Pop children’s ice creams grew in the high double digits in 2012.

Since Polman took on the CEO role in 2009, Unilever’s stock price has grown from approximately $20 per share to $40 per share.

This case vignette was drawn from the following sources: http://www.triplepundit.com/2013/09/sustainability-growing-unilevers-brand-equity-profits/;

http://www.unilever.com/sustainable-living-2014/news-and-resources/sustainable-living-news/Unilever-Sustainable-Living-Plan-helping-to-drive-growth.aspx;

http://unilever.com/images/ slp_Unilever-Sustainable-Living-Plan-2013_tcm13-388693.pdf;

http://www.adweek.com/news/advertising-branding/keith-weeds-plan-grow-unilever-and-reduce-its-global-footprint-163596;

http://www.adweek.com/news/advertising-branding/keith-weeds-plan-grow-unilever-and-reduce-its-global-foot-print-163596;

https://books.google.com/booksid=UKyaBQAAQBAJ&pg=PA484&lpg=PA484&dq=unilever+sales+increase+sustainability&source=bl&ots=RWpjUPL3ey&sig=nRf_oyf7kSihbeMzPlrSZLFD4y8&hl=en&sa=X&ei=z4I1VYDgG4OPyASN2YCwCw&sqi=2&ved=0CEkQ6AEwBg#v=onepage&q=unilever%20sales%20increase%20sustainability&f=false

Research suggests that involvement in the company’s CR practices teaches employees valuable new skills that they bring back to their regular roles for the company. IBM is working to put this in practice with its Corporate Service Corps program.

IBM manufactures and markets computer hardware and software, and offers infrastructure, hosting, and consulting services in areas ranging from mainframe computers to nanotechnology. The Company operates five business segments: Global Technology Services (GTS), Global Business Services (GBS), Software, Systems and Technology (STG), and Global Financing. With nearly $100 billion in revenue, the company employs over 430,000 people.

With the Corporate Service Corps, employees bring their core competencies and skills in such areas as project management, strategic planning, marketing, or engineering to an entrepreneurial company based in one of the countries designated by IBM as emerging market for growth such as Brazil, China, Ghana, India, Malaysia, Romania, and South Africa. Corporate Service Corps teams tackle issues ranging from public safety to urban agriculture.

The company highlights benefits such as:

  • Talent attraction – the program is the third most influential factor for talent seeking work at IBM after money and location;
  • Skills and competency development; and
  • Helping IBM open new markets.

The company states the program produces a $600 million return on a $200m investment. While the regular staff turnover rate is around 12% per year, the rate for employees in the Corporate Service Corps is less than 1%.

Sources:

Meister, 2012;

http://philpreston.co/ibm-delivers-lesson-employee-engagement-roi/