Honing talent through sustainability

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This article originally appeared in the Stanford Social Innovation Review.

Employees at the semiconductor chip maker Intel recently devised a new process that reduced the company’s chemical waste by 900,000 gallons each year, saving $45 million annually. Another team developed a plan to reuse and optimize networking systems in offices, which cut energy costs by $22 million.

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Projects like these produce financial and environmental benefits, of course. But equally valuable is Intel’s ability to energize and empower its frontline employees by making them agents for more sustainable business operations—an effort that has a significant positive impact on recruiting, retention, and employee productivity.

With top talent in short supply throughout much of the world and in most industries, employee attitudes about sustainable business practices are compelling more companies to take the issue seriously. A recent Bain & Company survey shows that an employee's perception of their company's sustainability agenda factors into how engaged they are at work—how enthusiastic, energetic, and creative they are. The survey included about 750 employees across industries ranging from financial services to telecommunications to healthcare to conglomerates, in Brazil, China, India, Germany, the UK, and the United States. Almost two-thirds of respondents said that sustainable business is extremely important to them, and interest peaks among employees ages 36 to 40—a young group but not the youngest.

Respondents had high expectations of companies. When asked which group should take the lead on sustainability, more respondents cited employers over consumers, employees, or governments.

One young woman said she joined a particular consumer products company because of its sustainable practices, particularly in the supply chain. She explained, “It wasn’t so much the role, but the company. Now I like to talk about what I’m doing and build up the company’s reputation.”

Employees are increasingly shaping their organization’s sustainability efforts. Two-thirds of employees under age 30 and one-third of those over 55 expect to play a role in how their firms approach the topic. In a departure from attitudes 5 or 10 years ago, most employees care more about ensuring that the business operations themselves are sustainable than they do about philanthropic activities. This is consistent with the trend we’ve observed of companies shifting their focus from peripherally related “do good” programs to actions at the heart of core processes, such as purchasing, manufacturing, and distribution.

Several regional differences emerged from the survey. Sustainability matters more to respondents in the developing world, where evidence of issues such as pollution, lax safety, and child labor may be more visible. Employees in these countries take ownership of the issue; 43% of developing-nation respondents said that employees have considerable influence on a company’s sustainability commitments, versus 25% in developed markets.

While employees everywhere are voting with their feet, many more in the developing world (52%), compared to developed nations (17%), said they have accepted lower pay to work for a sustainably minded firm. Some 59% of respondents in developing nations have excluded specific industries for employment because the industries do not match their beliefs on corporate sustainability, while 33% in developed nations have done so.

For companies across industries and geographies, the survey reinforces how sustainable practices have become an important means of attracting and motivating top talent. Yet many companies are missing the opportunity to engage their employees to full potential. Only one-third of respondents characterized their own employer as a clear leader that has fully incorporated sustainable practices, with one-fifth saying their companies have few or no efforts in the area.

What are successful sustainability leaders are doing differently?

Forward-thinking companies have increasingly involved employees in designing and implementing their programs. While companies typically craft a sustainability agenda to suit their individual industry and geographic footprint, the leaders do share several common characteristics:

1. They challenge employees to put sustainability at the heart of the business. This obviously takes executive commitment, a realistic plan, and significant time and resources. However, leading companies are seeing the effort pay off.

In 2007, UK-based Marks & Spencer launched Plan A (so called because there is no Plan B for the planet). Plan A aims to make the company the most sustainable retailer in the world by 2015 and to incorporate sustainability attributes, such as sustainable cotton or wood, into every product it sells by 2020 (currently one-third of its 3 billion products have Plan A attributes). In its $500 million seafood line, for instance, Marks & Spencer aims to sell only fish caught from sustainable sources as defined by authorities such as the Marine Stewardship Council—a standard it currently meets for 93% of the fish it sells. Buyers now work with environmental and fishing industry representatives to develop programs for meeting its goal.

Marks & Spencer carefully designed Plan A to engage employees at every level of the company in a variety of roles based on their job duties. Each of the more than 1,000 Marks & Spencer stores globally has a Plan A champion, drawn from the ranks of enthusiasts; this person spends about three hours a week guiding co-workers’ implementation of sustainability initiatives and spotting opportunities for improvement. To foster competition, the company regularly ranks each store on metrics such as electricity consumption, waste recovery, and paper usage. To foster collaboration, regional store Plan A champions also meet quarterly to share best practices.

Ideas for improvements or for entirely new initiatives bubble up from all corners of the organization. An example is the origin of one of Marks & Spencer’s most successful new initiatives: “shwopping.” In 2008, Simon Colbeck, head of technology for clothing, was concerned about the huge volume of garments that end up in landfills every year. He suggested teaming up with the nonprofit Oxfam’s 750 stores across the UK to resell used or unwanted clothing. The board approved Colbeck’s idea, and now 4 million articles of clothing are recycled each year, raising £2 million (roughly $3.1 million) in the past year for Oxfam. As a direct result of shwopping, Marks & Spencer has seen a rise in customer traffic for its clothing and thus further stickiness to its brand, while also helping the firm recycle more of its products.

2. They hold employees accountable. Certain job types—such as product engineers and purchasing agents—will encounter sustainability issues more frequently than others. Yet all employees can look for opportunities to advance the company’s cause, and leading companies try to set an appropriate level of accountability for job types that have an influence on environmental or social factors. Some have even begun to selectively tie compensation to sustainability metrics.

Intel has long linked the performance evaluations of some employees (such as environmental engineers) to environmental performance based on their roles. A decision to include environmental metrics in executive and employee bonus plans extended this connection to all employees in 2008. Higher-level employees, who have a broader job scope and greater ability to affect Intel’s performance, receive a higher percentage of their overall compensation through bonus programs. In 2011, the company focused environmental metrics on carbon emission reductions in operations and energy efficiency for new products. While this environmental component represents a relatively small portion of the overall bonus calculation, Intel believes that it increases employees’ collective focus on achieving the company’s environmental objectives.

Other companies have had similar success in tying compensation to metrics. At yogurt-maker Stonyfield Farms, senior management challenged its employees to save energy at the company’s facilities. Savings were tied to employee bonuses for all workers, providing additional motivation. The company achieved its annual goal of reducing company energy use per ton of product by more than 22%.

3. They equip employees with the right tools and training . Realizing major improvements in sustainability requires that employees have proper tools and ongoing training at hand so that they can focus their efforts on what the company deems most important.

Intel, for example, puts commodity managers and buyers through regular supply chain training to teach them methods for attaining company goals on environmental sustainability and corporate responsibility. It also provides tools—for example, a carbon calculator that helps manufacturing teams quantify the environmental impact of a given project.

Statoil, a Norwegian energy company, launched a climate and energy program in 2011 that nominates 10 senior executives to take part in a year-long program. Upon completion, the company expects participants to identify and respond to future climate uncertainties within their respective areas of responsibility.

As younger generations expand their presence in the workforce and push sustainability to the head of the corporate agenda, more companies will rely on frontline employees for creative approaches to sustainable operations. Articulating this “nobler mission” is a big motivator for employees and a powerful weapon in the pursuit for talent.

Jenny Davis-Peccoud leads Bain & Company’s Global Social Impact practice and is based in London. James Allen is co-head of Bain’s Global Strategy practice and is based in London. Melissa Artabane is the practice area manager for Bain’s Global Social Impact practice and is based in Boston.