By Edmund Bradford, Managing Director, Market2Win Ltd.
We have passed the tipping point of interest in sustainability. Sustainability and other good behavior metrics now need to be reported, meaning your strategic accounts will no longer be satisfied with bland statements of intent from your company. Sustainable SAM will be a key differentiator in the near future.
I was recently interviewing the head of sustainability at a global hospitality company when she told me an incredible fact: “In the past 12 months, for the first time ever, more investor funds have gone into proven sustainable companies than into non-sustainable companies.” So, if you are working in a company that has not proved itself sustainable to investors, you are in the wrong half of where the investor money is going.
If you want to see an example of this transition, just consider Blackrock, one of the world’s largest investors, with $8.68 trillion in assets under management at the end of December 2020. In his 2021 letter to CEOs, Blackrock’s CEO, Larry Fink, wrote about the fact that the pandemic had accelerated the tectonic shift to sustainable investing with a near doubling of Blackrock’s investments in this area compared to 2019.
Why is this?
First, investors are recognizing that climate change is an investment risk. They understand that companies that are serious about dealing with climate change are a better bet than companies that are not. Moreover, there is increasing evidence that companies, like Pepsi and Unilever, that are on top of the sustainability agenda, provide better returns. So it is not because investors have suddenly become environmentalists but rather because sustainability makes hard business sense.
Second, the rise of the Greta Thunberg generation is also focusing minds. It is estimated that “about $68 trillion of wealth will change hands in the next 25 years as the Baby Boomers die.”
Finally, the dramatic increase around the world in government intervention in sustainability is also a key factor. For example, the UK government committed itself to legally binding targets in its 2008 Climate Change Act and will showcase its efforts at the COP26 UN Climate Change Conference in Glasgow, Scotland, this November. In December 2020, the European Union agreed to a EUR 1.82trillion ($2.19 trillion) Green Deal to support a green recovery. In February 2021, U.S. President Joe Biden announced a $2 trillion Green New Deal. These combined forces from investors, customers and governments have created a perfect storm of sustainability change that is heading our way.
Understanding what we are talking about
Before we consider how sustainability is affecting the demands from your strategic accounts, it is worth considering what we are talking about. The world of sustainability is a large and complex one with many different views and measurement systems. Fortunately, there have been two significant steps forward in this arena. Firstly, much work has been done on Environmental, Social and Governance (ESG) metrics. Secondly, in September 2020, the World Economic Forum and the world’s biggest accounting firms agreed to a common approach to ESG and, therefore, a common way to measure sustainability. They agreed on four areas (or “pillars”) of measurement based on Principles of Governance, Planet, People and Prosperity. Note that this goes far beyond just the “green” agenda of helping the environment.
In addition to this, many experts like Professor Steve Kempster, co-author of “Good Dividends: Responsible Leadership of Business Purpose,” claim that you cannot become a sustainable company without having purposeful leadership at the top. That leadership will have to strike the right balance between short-term profits and long-term sustainable growth.
We have therefore created a 6P Model, which we find helpful in explaining sustainability to our clients. Again, sustainability is not just about being “greener.” It is a comprehensive approach aimed at challenging companies to grow in a good way that enhances the planet and delivers broader prosperity, happier employees and more sustainable profits. We call this “good growth,” and our view is that the best firms should aspire to be good growth companies.
The rise of sustainability in your strategic accounts
As I write this, I am aware of several initiatives underway to better assess the sustainability of suppliers. The United Nations is sponsoring an initiative to develop a common supplier framework in the health industry. Procurement functions in different companies are looking at how to apply ESG metrics to their key suppliers. The UK’s Chartered Institute of Purchasing & Supply is encouraging its members to conduct ethical and sustainable procurement. Individual companies, like Unilever, have warned their suppliers that supplying a sustainability plan will no longer be enough; as part of the tendering process, suppliers will need to demonstrate real commitments to hard targets, which will be tracked.
The reason this is happening is because the leadership teams of your strategic customers are being asked by their investors and their customers about what real actions they are taking to improve their supply chains. Indeed, if they are reporting on broader measures of greenhouse gas emissions, then they will need to know the emissions of their suppliers in order to complete the report. Broader measures could be reporting of greenhouse gas emissions from energy purchased and reporting of greenhouse gas emissions from the whole upstream and downstream value chain.
These reports will be scrutinized very carefully for signs of progress or regress, with significant ramifications on customer demand, brand valuation and share price.
How these changes will affect how customers buy from you
Strategic accounts will be looking for the following items from their key suppliers:
If it has not happened already, expect to see more of these factors written into RFPs. You should also expect the minimum (order-qualifying) criteria to rise as well. Vague answers to specific questions like “When will your organization achieve Net Zero GHG (greenhouse gas) emissions?” will not be acceptable. Suppliers that do not pass the minimum tests will not make it to final selection.
Your response? Developing sustainable SAM
These emerging trends mean that sustainability needs to migrate from something merely on your radar to something that is an integral part of your business and your account development process.
This will require you to have four items:
- Well thought-out plans, with specific targets and timescales, for how you will improve the sustainability of your whole organization and your organization’s supply chain in the future. This should include innovative ideas to collaborate with your customer to reduce the environmental impact of your joint relationship. This may include the redesign of products, services and account support to reduce carbon emissions. These organization-wide (enterprise-level) plans should be integrated with individual account plans.
- Evidence that there is a real commitment from the top to deliver these plans. This should include details about who has responsibility for sustainability in the company, whom that person reports to and how the account manager reports to them. Ideally, this should be a full-time position reporting directly to the CEO, whom the account manager can call upon for expert guidance and support.
- A detailed set of metrics that you will use to measure progress. These metrics should be defined, explained and justified (e.g., based on independently approved measurement standards like those of the Sustainability Accounting Standards Board) and applied at an account level.
- Robust procedures and systems in place to track progress using these metrics. Ideally, this should be done in collaboration with an independent auditor (e.g., one of the “Big Four” accounting firms). The auditor must be able to inspect individual account relationships upon request.
To get all this done, the following steps are recommended:
- Sustainability needs to be “coded” into your SAM blueprint.
- The “dirtiest” accounts need to be deprioritized in your strategic account selection process.
- The goals, objectives and strategies for individual accounts need to be re-appraised.
- The account plans need to be revised.
- The IT systems need to be re-engineered to gather new data.
- The account managers need to be trained in sustainability.
- The account review system needs to be re-wired with different auditors.
This will not be easy, but those that succeed in achieving sustainable SAM will gain a big advantage over those that flounder.
For example, let’s take a look at water, surely a commodity if ever there was one. Corporate buyers in the hospitality industry are very sensitive to the unit cost of buying water. High volumes and bulk discounts have been the norm for decades. However, a small British firm called Life Water is growing nicely without being forced to cut costs. It packages its water in an innovative can that is 100 percent recyclable and contains zero plastic, unlike the single-use plastic water bottles used by some of its competitors. In addition, it also acts to improve access to clean water. For every unit sold, it contributes to clean water projects around the world. It was voted Best Sustainable Beverage Brand in 2019, and a corporate buyer I was interviewing was very impressed with them. He is responsible for an annual spend of around £1billion ($1.20 billion) and is moving more spend their way.
What this should tell you is that, with a focus on sustainability, the actual cost of a product is less important than the value of the relationship to the buyer. From the supplier’s point of view, this means more revenue from the customer. For both sides of the relationship, it means a better long-term collaborative partnership.
Indeed, if you already have good collaborative relationships with your strategic customers, then you can leverage them in new ways to collectively improve the sustainability of your whole supply chain and the entire industry. There is widespread recognition that the only way to reduce global warming is to take broad collaborative action. Good strategic account management, therefore, has a crucial role to play in driving true cross-enterprise sustainable change.
Is achieving sustainable SAM easy? No. Is it a risky path to take? Yes.
However, the risk of not changing is even greater. Investors are encouraging change because they see the journey to sustainability as one that reduces the financial risks of climate change. As a strategic account manager, account director or program leader, you need to learn about this subject. That does not mean you need to go off and get a master’s degree in sustainability. You do not need to be the expert in every room. You simply need to be confident enough to have conversations on this subject. Those conversations will become more frequent and more important over the next few years.
The good news is that you should also already be a good change agent. You are well-accustomed to using all forms of formal and informal power to influence others in order to move business relationships in the right direction. You now need to upgrade from change agency to change leadership. If you have not already done so, read Leading Change by John P Kotter and start practicing the art. You will then be equipped to make a real difference.
Let’s be frank about this: As someone who is already working across functional, organizational and geographic boundaries, you can make a significant difference here by helping improve your company’s fortunes while also contributing meaningfully to saving our planet.
Edmund Bradford has been advising organizations on how to improve their account management programs for over 25 years. He is developing a new simulation to teach sustainability and can be reached on LinkedIn at: linkedin.com/in/edmundbradford . You can find out more about Good Growth at http://goodgrowthacademy.com/.