Posts Tagged ‘Monetizing sustainability’

How Corporate America Can Benefit from a More Sustainable Healthcare System

posted by Tara Knight

I am posting on behalf of Robert Ludke, Managing Director Public Strategies, Inc. who is contributed this posting to ResponsAbility

When people refer to “sustainability,” it is often in the context of a company seeking to improve its bottom line and the environment by doing things like using less water and becoming more energy efficient. Yet, the most unsustainable cost facing nearly every company across the world is healthcare.

The challenge of increasing healthcare costs is particularly problematic in the United States – one of the few countries in the world where employer-funded coverage is the mainstay of the insurance system and universal coverage is not guaranteed. Case in point: for American companies, healthcare coverage is the most expensive benefit paid by employers.

Despite all the flaws in the current system – including the high cost of healthcare, the inefficient delivery of care and the fact that more than 50 million Americans lack coverage – there is little likelihood of fundamental change.

This means nearly every one of our U.S.-based clients is facing a challenge. They are largely stuck in the general confines of the current system, with its many shortcomings, not the least of which is an unsustainable cost trajectory.

Some companies are seeking to address that challenge by encouraging their employees to live healthier and more responsible lives in which a greater emphasis is placed on preventive care. While some incremental success has been achieved in encouraging people to lead healthier lives and increasing access to preventive healthcare, such efforts will not produce savings sufficient enough to bend the so-called “cost curve” to the point where there is a reduction in the amount of money spent on healthcare.

In order to bend the cost curve, a fundamental shift in how society manages healthcare is needed. While that challenge is daunting, for a significant number of our clients, it presents an opportunity not only to benefit their bottom line but also to improve their reputation as responsible employers committed to a healthier, more sustainable society.

In particular, many of our largest clients have the ability to use the purchasing power they gain from the number of employees they cover with health insurance to either insist on changes to how care is delivered to their employees or to serve as a useful resource to policymakers and thought leaders who are working to improve health outcomes at a lower cost.

If the private sector wants to have a more effective voice in how the cost of healthcare can be reduced while improving the outcomes of that care, it needs to engage in and shape the public debate. Opportunities abound for points of interaction with the health policy community, to launch pilot projects to develop and implement best practices, and for leading companies to be held out to the public as thought leaders in developing and implementing policies to improve the lives of their employees and the broader public.

Every company is an energy company?

posted by Tara Knight

I just read a really fantastic article by one of our clients, Deloitte.

The essay was written for Forbes by Nick Main (Deloitte’s Global Managing Director for Sustainability & Climate Change Services) and Dr. Joseph Stanislaw (an Independent Senior Advisor to Deloitte’s Energy & Sustainability practice) about corporate energy use and the need for a strategy to manage energy use.

Here’s a teaser, if you would like to read the full article, click the link below to go right to the Forbes blog to read the full post.

Every company is an energy company
Every company is an energy company. And if it isn’t, it will be soon. A decade from now, a company without an energy and sustainability department could be as unusual as one without a human resources department.  Or, it might be out of business.
Read the full article here: Every company is an energy company (on Forbes blog)

Factoring CSR performance in executive pay

posted by Tara Knight

I stumbled upon an article recently about the summary of the recent removal of Shell from the Dow Jones Sustainability Index (DJSI).

According to the article in The Responsible Investor, Dow Jones and its partner SAM, dropped Shell from the index in September.  DJSI rules allow for elimination of companies from the Index following extraordinary events (for example, BP was removed in June following the Gulf of Mexico oil spill) however, there seems to be no specific reason given for the decision to remove Shell from the index that I have come across. It’s pretty clear that Royal Dutch Shell (in a post on their website) was very surprised by the move too.

Curious, I decided to look up Shell’s most recent Sustainability Report (2009). Sustainable development happens to account for 20 percent of their executive compensation scorecard.  For 2010, the Dow Jones sustainability Indexes assessment of Shell’s performance accounts for half of the sustainable development element in the scorecard for members of the Executive Committee. It’s no surprise that Shell is seriously re-considering this executive bonus program as a result (“Shell to review Dow Jones Sustainability Index as bonus metric after being dumped from benchmark“). Being dropped (unceremoniously) from the DJSI is a serious hit to potential compensation, and there are likely a lot of concerned executives about this event.

What I hadn’t realized (until I dug a bit) is that this is part of a wider trend for Dutch businesses to seriously consider, and link, sustainability performance with senior management compensation packages. In fact, Royal Dutch Shell is one of a number of Dutch companies (including Dutch life sciences giant DSM, and postal operator TNT). According to Sustainable Sourcing this kind of incentive plan was pioneered by Akzo Nobel which based its long-term bonus payment structure according to its position in the Dow Jones sustainability index for chemical companies.

I am now very curious about other companies tying their executive bonus packages with external sustainability indices. Clearly, this kind of association will cause real shifts in decision making around sustainability within organizations. Do you know of North American companies who are experimenting with new models for their senior management compensation packages?