Productivity and sustainability?! Being strategic with sustainability

For the last 20 years, we’ve heard an awful lot about how UK businesses need to increase their productivity. They need to do more with less. They need to innovate to compete with others on ‘the world market’. They need to increase their productivity to improve the UK GDP, to overcome regional inequalities, to provide job prospects for growing numbers of unemployed.

If that wasn’t difficult enough, businesses now need to transition to a Net Zero economy by 2050 (and I’m not even going to consider the pandemic in this blog!). Although 2050 seems like a long way off, the type of change that will be required for many companies is not the sort that you want to be rushing at the last minute. So how do you juggle these two demands – to increase your company’s productivity and to increase its sustainability?

No-brainer sustainability?

The good news is that many sustainability actions also reduce your costs. Reducing electricity usage by installing low-power lights, timer-switches, and so on involves little outlay but reduces your bills. Reducing waste might involve a bit of upfront time to redesign processes but again should result in reduced supplier costs. These types of actions are no-brainers.

But many sustainability actions are less easy to decide upon. Should you invest in a reduced fluid machining tool because it minimises risk of pollution even though it will cost significantly more? Should you change your suppliers to those local to you to reduce carbon emissions even if it carries some risk? Should you redesign your product to use fewer resources even if you are not convinced about the long-term customer uptake? And so on.

Looking for the win-win in sustainability

We are investigating these dilemmas (and many others) in manufacturing SMEs in the UK. Our research suggests that a company operates with a set of goals which they may be more or less aware of (see the diagram below). Some of these goals are high-end, abstract, visions and values. Others are specific and tangible like filling each customer’s order. And then in the middle we have the ongoing (zero safety incidents, work/life balance) and medium-term goals (five-year plans, horizon projections).

In the diagram, we have created an organisational goal hierarchy for a meat/sausage manufacturer. You can see that their abstract, visionary goals are to create a premium product, be a leading supplier, have operational efficiency and be innovative. Their strategies are based around quality, value, innovation and people, and their strategic initiatives are focused on revenue growth, accidents, facilities, the management team and corporate social responsibility (CSR). Finally, their Key Performance Indicators (KPI) and “tasks” are around increased production, getting into international markets and consolidating their UK ones, investing in facilities, and then the “environmental ones” – energy efficiency, waste reduction and water usage.

 

That’s the first step – knowing your goals. But even when we know what the goals are, we don’t often think about how these goals intersect.

Sometimes an action can help the goals to work together. This is the situation with reducing electricity – it helps the goal of reducing costs and it helps the goal of reducing carbon emissions. Having staff work from home can help a goal of reducing workplace costs and a goal of employee health and safety. In the diagram, for example, the focus on quality helps the company to have a reputation for premium products and be a leading supplier, and the CSR strategy helps somewhat with their identity as a “people-oriented” company.

But, sometimes the organisation’s goals can conflict with each other. Having staff work from home can help reduce office-based costs, but it may hinder a goal of collegiality and culture due to reduced interaction. Reshoring suppliers can help a sustainability goal but it could run the risk of conflicting with a productivity goal.

In the company described in the above diagram, increased production hinders energy, waste and water goals and working towards the CSR strategy makes it difficult to create good-value (ie cheaper) products. Each company is different and even when the goals might be the same across companies, you will likely have a different set of relationships between the goals based on your own particular context.

What are your trade-offs and synergies?

The goals, and the connections between the goals, will be different for every business (and likely be perceived as different for different people within the business). We are certainly not advocating that there is one “right” set of goals and connections (what we call an organisational goal hierarchy). Instead, we believe that you need to be aware of your own organisational goal hierarchy before making decisions.

Some businesses will be juggling productivity and sustainability, others will be using them both to push forward, while others still will remain doing what they’ve always done and scrambling at the end. Having a clear understanding of how your business’s goals interact with each other can help you to deal with productivity and sustainability in the way you want. This will not only make decisions easier, it will also have a fundamental effect on your bottom line and on the transition to a Net Zero economy.

Interested in learning more?

If you are interested in becoming a part of our SME sustainability community or to participate in our research, please see bit.ly/productivesustainable or email Naomi Booth Wade n.s.boothwade@leeds.ac.uk.

This project is funded by the ESRC Productivity Insights Network. Grant number 154166.