VALERIE KHOO: For companies that are on the right track in tackling sustainability – where have you seen the biggest achievements?
PAUL GILDING: I think the biggest achievements come when companies connect their sustainability focus to one or more core drivers of value for their business.  This can be very specific. For example, when Ecos first worked with Insurance Australia Group (IAG) in 2002-2003 they were able to identify two very clear areas: workplace safety, given they were Australia’s biggest provider of Workcover insurance and wanted to grow in that area; and climate change, given that weather-related events like storms and fires were major drivers of their biggest cost area, claims for damage.

The value at stake might also be more general. Again, using IAG as an example, they clearly saw sustainability as a way to motivate their employees. A lot of companies tell us that a positive impact on their ability to recruit and retain the best people, and in particular today’s younger generation of highly qualified employees, is the most immediate way that they see corporate sustainability adding value. Smart companies using sustainability as part of core business strategy, and that are engaging widely with diverse stakeholders, also use it to manage and reduce risk and drive innovation and market insights.

VALERIE KHOO: Where have Australian businesses failed in the area of sustainability?
PAUL GILDING: For a start, a lot of businesses haven’treally embraced sustainability. They’ve signed on for a softer, mushier thing called corporate social responsibility. By its very nature that’s something that will always be stuck at the margins of a business, as a ‘nice to do’ or ‘nice to have’, but not the real business. 

Whatever they call it, many businesses have treated corporate sustainability as a business add-on that you have a bit of on the side. You’re only serious about sustainability in business if you place it at the core of your business and understand how social and environmental factors put value at stake. How does climate change, for example, change the risk equation for insuring cars and houses if you are an insurance company? If you are a bank, how will it impact on your loan portfolio and your investments? If you are a mining company, will your product still be worth digging up in 10, or 20, or 30 years, which is pretty important if you are looking at massive up-front investments in projects that might have mining lives of 50 years or more? 

One early trap for companies is thinking that producing a sustainability report and going to all of the right conferences is what you do when you decide to become a more sustainable business. Those things can be great to understand your issues better and see what other companies are doing, but they won’t necessarily deliver real change across a business.

Often sustainability or CSR or whatever you call it gets stuck in a box like Health, Safety and Environment, or relies so heavily on one or a handful of people that the company loses all of its knowledge and relationships if they move on. This may not be such a problem for big companies with well-established teams and policies, but it can play havoc with smaller companies or newcomers to the field.

VALERIE KHOO: What are the main obstacles and challenges facing Australian businesses in bringing sustainability principles into the mainstream?
PAUL GILDING: I think one of the biggest issues is that they just aren’t being supported by the Australian Government because it has lagged a lot of the developed world on climate policy and environmental challenges more broadly. What this means on the ground for companies is that the benefits of driving business sustainability aren’t that clear and nor are the penalties for not taking leadership on sustainability. 

So the leaders don’t get rewarded enough and the laggards don’t get punished enough. That makes it hard for the leadership companies to make a water-tight case to their shareholders that sustainability is good for the financial bottom line as well as the conscience. I think companies also think that sustainability is some kind of one-size-fits-all activity for business.

My view is that every company will have a unique sustainability equation based on a whole range of factors to do with its history, culture, market profile, product range and how it makes money. Even two companies of similar size in the same sector might come up with totally different strategies, and both still be totally right in terms of what makes sense for their business.

VALERIE KHOO: Climate change and greenhouse emissions are said to be a huge imminent threat on the planet. How vital is a carbon tax and what are the consequences if one isn’t introduced soon?
PAUL GILDING: It’s not so much a carbon tax per se. I think it’s a carbon price signal that clearly drives business activity and investment towards outcomes that will produce real results, specifically less greenhouse gases polluting the atmosphere. That ‘price on carbon’ could be set by a tax, or through a carbon market with trading, or through some combination of the two. 

Starting with trading does offer certain advantages in softening the early blow and allowing business to do what it does best; coming up with lowest-cost solutions to deliver a want or need. It’s vital that we get this price signal fast. At the moment we have people going around trying to decree the right solution and technology, whether it is the environmental lobby with renewable energy, or the nuclear industry with nuclear power. 

Create the right price signal, be very clear about what the law and society requires in terms of social and environmental factors as well as economic ones, and then let the market come up with some answers.

VALERIE KHOO: You have said that “too many companies now seem to view reporting as their strategy on sustainability”. What needs to happen for huge corporations to understand sustainability as a value-creating concept?
PAUL GILDING: That’s simple. Whatever the issue, they need to be able to connect it to how they create profits and how they can drive growth, or from a negative perspective, how it puts their business at risk.  Often those are the two sides of the one coin. So if you are an alcohol business, community safety is a key sustainability issue. If your business is mining coal, you want to be very sure that you’ll still have a business if there is a price on carbon in two, or five, or 10 or 20 years. If you are an insurance company, you’ll face being wiped out if a one-in-100-year storm event suddenly becomes one-in-50-years, or one-in-25.

To make it a core business issue they need to attach dollar estimates to the risk or opportunity, even if they are only guesstimates, and they need to develop strategies and action plans to pursue the opportunity or to manage the risk.

VALERIE KHOO: Fast forward 20 years. Paint a picture of what you hope the big end of town looks like – and its attitudes and beliefs on sustainability.
PAUL GILDING: Capitalism will adapt and evolve because it has to, and because that’s where the profit and growth opportunities will be located. You can already see companies like GE, DuPont, Toyota and BP moving that way quite strongly now. Ecos often talks about sustainable growth. Our thesis is that companies will work out how to maximise their profits by maximising the value they create for society including the environment. 

My bet is that the successful mega-corporations of the future, say in 20 years’ time, will be the ones that adapted quickly and worked out a sustainable growth formula for their business in their sector. Some big names now won’t move fast enough or at all and they’ll decline or disappear. I call it Darwinian sustainability, with capitalism almost imitating nature in its constant quest to reinvent itself.

Paul Gilding is one of Australia’s foremost thinkers and leaders in sustainability. He is Chief Executive Officer of Ecos Corporation and former Executive Director of Greenpeace International. With a 20-year involvement in social change organisations, Gilding now consults on how businesses can adapt and respond to sustainability. These include DuPont, Ford, Placer Dome, Diageo and Suncor Energy, as well as Australian corporations such as IAG, ANZ, BHP, and Lend Lease. He is also chief executive officer of Easy Being Green.

www.ecoscorp.com