NEW REPORTING REQUIREMENTS, government incentives and changing investor sentiment have all made sustainability more than an altruistic objective for Britain’s biggest corporates. In the case of Interserve, a proactive approach to sustainability is already paying commercial dividends.
According to its group finance director Tim Haywood, who is also Interserve’s head of sustainability, the FTSE 250 construction and support services business has started winning outsourcing contracts off the back of a business-wide sustainability plan.
“We have been winning some important contracts where the deciding factor in a tight financial bid was thestrength of sustainability promise,” Haywood tells Financial Director.
As head of sustainability, Haywood has produced a sustainability programme for the business which includes measurable targets, such as: by 2014 increase re-use of construction waste by 15%; by 2016 cut water usage by 20%; and by 2018 create 500 apprenticeships.
Launched in March 2013, Interserve’s SustainAbilities programme set out 48 targets, phased between 2014 and 2020, that put the issue of sustainability at the forefront of its decision making, risk management and growth strategy.
“It seeks to put a proper business case for disciplines around sustainability,” explains Haywood. “Sustainable business is a good business, whether security of supply, risk management, reducing costs or engaging better with customer.”
As part of the programme, Interserve has made a commitment to offer ‘open book’ accounting – where contract terms, costs and profit margins are revealed as standard practice – on all of its public sector contracts by 2020. Indeed, Haywood says the company’s standing with government, one of its key customers, has improved at a time “when some of our peer group is under question”.
In recent years, there has been a widespread loss of confidence in public sector outsourcing, while the government introduced rules last year that could see companies bidding for lucrative contracts blackballed if they are found to have used aggressive tax structures.
Year of progress
One year into the sustainability programme Interserve has achieved an absolute reduction of 2,269 tonnes of CO2 equivalent emissions from business travel in 2013 compared to 2012 – the equivalent of taking more than 400 cars off the road, while all UK operating divisions have incorporated sustainable procurement requirements into their supplier codes of conduct. Apart from improving its reputation and creating a healthy business environment, tangible benefits have included cost savings, such as a 30% reduction in costs in Interserve’s Qatar construction business.
“We have tried to make sure it is specific and traceable, auditable and valid. The purpose is multi-faceted and covers all aspects of business,” says Haywood.
To enable accurate reporting and measurement of its sustainability goals, Interserve designed, built and implemented an entirely new IT system from scratch. Part data warehouse, it is also a reporting tool and repository and a “place to see what the rules are and dig into the data analysis”. For instance, the business can monitor its data on water usage through the new system; in 2013 total water usage was 1.6 million cubic metres.
Additionally, wasted resource data is being collected through the system with ambitious targets for reducing, refusing and recycling construction office waster. From the data gathered to date, Interserve estimates its total 2013 waste was 69,000 tonnes – 90% of which originates from construction sites. According to Haywood, the business was able to build the system without “ladling in too much extra cost”.
“We have done our own strategising and planning and have to spend the next six months in data mines, digging away,” he says. “We collect data at the contractual level, centrally and drag it out of suppliers.”
Band of brothers
Interserve is hardly the only business to be forging ahead in this area. Last year, a group of top European CFOs banded together in an attempt to integrate environmental and sustainability issues into the financial decision-making process. The network, which includes the finance heads of Sainsbury’s, Danone, Royal DSM, British Land and Marks & Spencer, was established by HRH The Prince of Wales’ Accounting for Sustainability (A4S) Project.
It looks to respond to challenges including climate change, a rising and aging global population, rapid urbanisation, and increased consumption. John Rogers, co-chairman of the A4S CFO Leadership Network and CFO of Sainsbury’s, said on its launch: “What used to be seen as ‘greenwash’ needs to become as natural to company finance teams as it is to corporate responsibility departments or even NGOs.”
Member organisations joining the network are: Anglian Water, BUPA, Burberry Group, British Land, The Crown Estate, Danone, Royal DSM, Marks & Spencer, National Grid, Sainsbury’s, SSE, South West Water, Unilever, United Utilities, Walmart EMEA and Yorkshire Water.