A company whose customers don’t care about sustainability might think there’s nothing to be gained from the responsibility cause. But the company’s employees know otherwise
Many companies would do well to design their triple bottom line efforts – where the triple bottom line accounts for planet, people and profits – with both eyes on employee engagement. When they do, they may also discover a much larger business case for sustainability, one that reaches for savings and the benefits that come with having a more engaged workforce.
So when you’re thinking about how to shape your sustainability programme, consider starting with the question: “What would get our employees more jazzed about being here?”
We first became aware of how sustainability can help drive employee engagement and create better business results when working on a triple bottom line strategy for a large and growing restaurant chain. This chain had more than 1,000 outlets, slightly more than half of which were owned by the company and the remainder by franchisees.
Company leaders and key managers were trying to decide what sustainability meant to the organisation and how they could get moving forward on it, both at corporate headquarters and in the restaurants themselves. For the purposes of this story, we’ll call the company Acme Corporation.
Acme had already decided to improve its environmental profile by reducing the amount of packaging used in the restaurants, using recycled paper bags whenever possible, creating environmental bulletin boards in the restaurants featuring local news stories, and focusing on several other “customer-facing” eco-initiatives. The planning committee for this initiative was excited to get going along these lines, and so were key company leaders.
But the value of this strategy was called into question when someone pointed to data from internal customer polls that clearly showed the environment to be a low priority for Acme customers, despite the fact that many of Acme’s competitors appeared to be working on similar customer-facing efforts. According to the surveys, Acme’s customers’ highest priorities were – unsurprisingly – tasty, wholesome, fresh food, sold at reasonable prices and served in very clean restaurants in timely fashion by friendly and helpful staff. This was especially true for “frequent eaters”, who were disproportionately responsible for Acme’s profitability. Out of 15 priorities presented on a checklist, the environment was ranked 14th by frequent eaters.
Nonetheless, Acme was ploughing ahead with its efforts to convince its customers that the restaurants cared about the environment. (We call this the “ready, fire, aim” approach to strategy, and it is disconcertingly common.)
Aiming at a new target
When this disconnect between the environmental plan and the data was called out for the second time, more forcefully, it prompted a rethinking of the plan. And two additional pieces of data were quickly discovered that helped shape a far more powerful and effective approach to environmental action.
First, a key stakeholder group did care deeply about the environment – not Acme’s customers, but its employees. In several employee surveys, frontline workers in particular had expressed their concerns about protecting the environment and their belief that the company was doing very little to reduce its obvious environmental impacts. These workers, most of them 20- and 30-somethings, exemplified one of today’s most significant workforce trends: the desire to bring one’s values to work.
The second data point was that Acme’s research, conducted frequently over a period of years, had noted a direct, straight-line correlation between employee engagement and business results (see figures 1 and 2).
As these figures show, with more engaged employees, Acme enjoyed consistently higher scores on a scale measuring overall customer satisfaction. Additional data showed a strong correlation between customer satisfaction and profitability, especially among the critical group of frequent eaters. In addition, with more engaged employees, Acme also showed a measurably lower rate of employee turnover (presented as an annual percentage figure) than restaurants with less engaged employees. Lower turnover also had a small but positive impact on customer satisfaction.
All these results make intuitive sense. Highly engaged restaurant workers are likely to be more motivated to keep the facility clean and welcoming, provide good food with good service in a timely fashion, and take other discretionary actions that will lead directly to higher levels of customer satisfaction and revenue. As most of the business world now knows, employee engagement has been one of the main ingredients in Starbucks’ rise.
A new sustainability strategy emerged, one with significant ramifications for HR: turn the focus of the environmental programme away from customers, who did not care about Acme’s ecofriendliness, and towards employees, who did. Call it the inside-out sustainability strategy.
So Acme cut back on its plans for recycled bags and community environmental bulletin boards and instead began to focus on creating ways for employees to participate in helping the company become more sustainable. The company set about creating regional green teams of frontline employees, charged with finding and fixing wasteful or polluting practices. It then considered how to identify and reward the stores and employees who came up with the most effective ways to improve environmental performance, looked at launching an internal environmental website to coordinate the programme and spread best practice and other information, and considered other sustainability activities designed to encourage additional employee involvement.
Interestingly enough, Acme had previously never set any environmental goals at all at the store, regional, or corporate level. Now the company began to consider such goals – not to save the environment or even to save money, but to generate excitement, commitment, teamwork, and loyalty among its employees. In other words, Acme wanted an environmental programme in order to “move the needle” on employee engagement.
The cost savings that many of the restaurants could enjoy as a result of resource conservation and other environmental efforts soon emerged as a secondary goal. To create a list of possible issues that the employees and the green teams could address effectively, Acme hired an environmental engineering firm to conduct environmental audits at some of its locations. Company executives were stunned and shocked when informed about how much waste there was in the typical restaurant and how much money they or their franchisees could save by taking some relatively inexpensive, short-term steps.
They learned that lights and stoves were left on 24 hours a day in some locations, water was wasted almost everywhere, recycling and composting efforts were minimal or non-existent, and waste disposal costs and practices were highly inconsistent and often untracked.
The traditional financially based business case for environmental action turned out to be very strong at Acme. With modest technical assistance and some simple guidelines that could be easily transferred between the stores (as they all had similar configurations, equipment, and products), Acme restaurants could save an estimated average of $10,000 a year, creating about $7m in additional profits for the company and $7m for the franchisees. The environmental case was almost as dramatic, so company managers had three reasons to smile.
Acme and many of its franchisees began to pursue these savings by using employee teams to prioritise and address environmental issues. From Acme’s perspective, the cost savings were welcome. But they were potentially dwarfed by the business benefits that might result if the environmental programme drove up the level of employee engagement. So the company began to communicate with all employees about these programmes, including the vast majority of Acme employees who were not directly involved with the green programme (dubbed “bystander employees”).
In the course of this effort, Acme had made three important discoveries:
1. Getting employees involved in the company’s environmental effort was a much better strategy, with potentially much greater reward, than trying to impress customers, for whom environmental activities in the restaurants were a low priority.
2. Although the traditional business case for sustainability (centred on cost savings) was significant, the employee engagement business case was potentially even more significant. The sustainability programmes created the opportunity to increase engagement among both actively involved employees and bystander employees.
3. Given the demonstrated relationship between employee engagement, customer satisfaction and financial returns, getting employees involved in or excited by environmental efforts at work could create significant business benefits, both measurable and non-measurable.
The golden triangle
As the Acme story illustrates, the connections between employee engagement, sustainability and business results may be more dynamic and more profitable than most companies assume. As Adam Werbach, formerly chief sustainability officer of Saatchi & Saatchi and chairman of the communication group’s sustainability practice, observes: “Sustainability provides a fresh conversation for soliciting employee input, unleashing employee creativity, surfacing and recognising leadership talent, and driving innovation – all of which further engage employees.”
The Doughty Centre for Corporate Responsibility has reached similar conclusions in a recent study, which it summarises with the following three points:
- Employee engagement is both a driver, as well as an outcome, of corporate social performance and sustainable value creation.
- Corporate [social performance] has both a direct and indirect impact (via employee engagement) on the creation of sustainable business value.
- Social intrapreneurs – who are engaged [within companies] in both [social] and commercial innovation – can improve corporate social performance and enhance sustainable business value.
The strongest programmes, and those that we believe can yield the greatest business benefits, purposely link sustainability, employee engagement and business results in a powerful, mutually reinforcing set of relationships that we call the Golden Triangle (see figure 3). The Golden Triangle illustrates the interrelationship of sustainability, employee engagement and business results. A positive relationship along any leg of the triangle reinforces the positive relationships along the other two legs. Depending on the numbers, the employee engagement benefits could be bigger than the sustainability benefits.
As one might intuitively assume, increases in engagement are likely to be higher for participants than for bystander employees. (Of course, employees who volunteer for green teams – or for other voluntary programmes at work – may already be more engaged than their bystander counterparts. Even so, their engagement levels may rise further with participation.) But both actively engaged and bystander employees appear to experience greater engagement when companies pursue triple-bottom-line objectives.
Ingersoll Rand (IR) recently conducted an employee engagement survey among 192 employees, about 65% of whom were members of green teams. The survey showed that green team members were more engaged. In particular, they were less likely to look for a job elsewhere and more likely to refer a friend to IR for employment, both classic measures of engagement.
But IR then surveyed tens of thousands of employees at hundreds of locations around the world. The data showed that bystander employees working at job sites that had green teams were more engaged than employees working at sites lacking such teams. Thus, enthusiasm for sustainability efforts appears to extend to bystander employees who are aware of such efforts but are not participating in them – quantitative evidence that the benefits depicted in the Golden Triangle are real.
Starbucks offers a vivid example of how the Golden Triangle can multiply the business value of sustainability. In fact, the engagement case is so powerful that Starbucks tries to ensure “values alignment” between the company and its employees from the hiring process forward.
Rick Badgely, Starbucks’ vice-president for global staffing says: “If our values aren’t in line with yours, I don’t care how good you are – this isn’t the right place for you.” Another senior Starbucks HR executive told us: “The company recognises that in order to get people to engage at a very high level, it’s got be about something more than just a pay cheque. It's got to be about a sense of being part of something bigger. It’s not a quid pro quo exactly, but it delivers a high level of performance that you just can’t put a number on.”
Actually, we think you often can put a number on the value created by sustainability – especially if, like Acme, you observe a direct correlation between employee engagement, customer satisfaction and profit. And if bystander engagement runs broad and deep as the result of triple-bottom-line-related programmes, it may contribute far more to profit than the programmes themselves.
For example, it’s likely that Google’s recent decision to stand up to the Chinese government on human rights caused a measurable increase in motivation, loyalty, and commitment among the organisation’s 33,000 employees.
In the end, the connection among sustainability, employee engagement and business results makes plenty of sense. After all, almost everybody wants to be associated with organisations that they perceive to be doing the right thing. And the good feelings you generate by choosing the path of sustainability yield benefits you can count in hard, cold cash.
If you don’t believe it, start measuring them and see.
This essay is based on the new book, Talent, Transformation and the Triple Bottom Line: How to Leverage Human Resources for Sustainable Growth, by Andrew W Savitz with Karl Weber (Wiley, 2013). For more information on the overlap between human resources and sustainability visit.Andrew Savitz Employee engagement employee training HR human resources internal strategy Karl Weber