August 29, 2023

Podcast #3: Maximising your Sustainability Budget

August 29, 2023

Podcast #3: Maximising your Sustainability Budget

August 29, 2023

Podcast #3: Maximising your Sustainability Budget

August 2023

Podcast #3: Maximising your Sustainability Budget

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Hey everyone. Welcome to State of Sustainability, where we deliver key insights to help sustainability professionals transform the sustainability of their organisation. What we're gonna discuss today is everything related to budgets and investments. So we're going to unlock:

  • How you think about the different categories of your budget
  • How you make the most out of those categories
  • How you work with others to unlock their budgets
  • How you maximise the impact that you can have for the effort that you're putting in as a sustainability team.

Small side note, we actually wanted to use this session to also talk about carbon pricing and business cases and all this stuff that's kind of related. It ended up being quite a lot to cover in one session. So we've ended up splitting this into two parts.

So we've got this part where we're going to really focus on budgets and how to unlock more budgetary capacity. And then you'll see a separate podcast episode where we're gonna talk about carbon pricing and building business cases. So stay tuned for that.

1. Allocating Internal Budget

So let's start with anchoring on scope. From a budget perspective, most sustainability teams will have two types of budget. This is budget that you directly control and budget that you influence over the last maybe 10, 12, 13 years. I've had the privilege of working with many different types of sustainability teams, probably engaged with over a hundred different sustainability teams in some shape or form. And so I've seen a lot of different shapes and sizes. What I'm going to share or outline right now is  almost like the best in class of what I see. And so, take this with a bit of flexibility in terms of the tailoring that you might need to apply this to your organisation.So let's, let's start with maybe looking at the budget that you directly control.

This typically includes three aspects.

  1. One is headcount. So this is the core team. This is the people sitting within the sustainability function. We'll touch a little on just how big that might be or how small.
  2. External spend. This is typically around consulting software data, but the sustainability team usually has an element of external discretionary spend that they can put towards services and service providers.
  3. Project spend. This is again, often discretionary, often quite small and ring-fenced, and it's usually intended for one-off pilot style projects.

This, this sort of scope of headcount, external spend and project spend is typically what's within the domain and at the discretion of a sustainability team or sustainability function. There are obviously exceptions. I've seen some cases where the head of sustainability also has the R&D budget.  I've seen some instances where the Head of Operations is also the Head of Sustainability, and so has access to both budgets. So there are a lot of variations. But let's go with this for the purposes of illustration.

You then have a budget that you influence. Within this there'll be the budgets of other teams within the organisation. Most particularly, I think of three budget pools.

  1. R&D, or research and development.
  2. Operations.
  3. Procurement.

Typically these three budgetary pools, these three functions will be important stakeholder sets and important budgetary allocations that you might be able to leverage or tap into.  I'm going to go through each one of these in turn and give a few observations, a few learnings, a few examples to help you make the most out of, again, the sustainability impact that you wanna have, but also just make make money go further, frankly.

So let's talk through each of these. Let's start with team.I think a function of how new sustainability is as a setup. And so 10 years ago, maybe 5% of Fortune 500 companies had a Chief Sustainability Officer or equivalent, which means that at most, 5% of Fortune 500 had a sustainability function. And so the sustainability team is a relatively new team for most organisations. And now those numbers are probably inverted and I would expect now. 95% of Fortune 500 companies have a Chief Sustainability Officer or equivalent, or are looking for one or have recently hired one. And all of those are probably in the process or at some stage in the evolution of setting up a proper sustainability team to drive things forward.

What I've noticed, however, is that most companies have the balance off. When it comes to the size of this team, and so it's often either too lean to be effective, uh, in which case the team really struggles to get beyond the simple reporting requirements. So a very small sustainability team trying to spread its wings over the entirety of a large organisation. It often just finds that 70% of their time is taken up with data gathering, coordination around data gathering, figuring out what reporting requirements they need to meet, working with externals to inform them on the standards that they need to comply with. Just getting the reports out the door fast enough.

I know one Chief Sustainability Officer, for example, it's a two person team. It's a several billion dollar revenue business. And I think that for that size of business, you know, really kudos to that team. They're doing an amazing job, but it's genuinely really hard to get beyond the core reporting work when you're that far stretched.

At the other extreme, you also find teams that are so large that you wonder how they can be efficient and you wonder how they can avoid the trap of just creating lots of work for each other, and lots of work for all these roles that they have in the sustainability team. And so, you know, again, anecdotally, I was speaking at one point with a company that was actually about the same size as the first example I gave.

In both cases, companies that are around six or $7 billion revenue in the first instance where it was too sort of lean to get beyond reporting, the sustainability team was two people. In the second instance, it was 180 people. And again, I wanna just say that again because no one really fully believes me when I give that example. It's around $7 billion revenue, and they have around 180 people in some shape or form working on sustainability in the organisation.

If you are a motivated sustainability professional, or a sustainability aficionado of some stripe, or just a well wisher of the climate change mitigation challenge, you're probably thinking; “wow, 180 people, that's fantastic. This organisation must really be putting all the chips in and just getting all of the impetus that they can and all of the momentum that they can to make change happen”. And there's probably a big element of truth in that, but at the same time, you kind of wonder that size of function. Is it focusing on the most important things?

Is it managing to be effective rather than just busy? Is it setting itself up? For a right sizing at some point where at some point you know, a consultancy is going to come in and say, look, this team is bloated. Here's the benchmark. It needs to be one 10th of the size. And then suddenly you're two steps back.

There's a lot of benefit in setting up a sustainability team that is the right size for the challenge that you need today, and then, you know, it can be the right size that for the challenge that you'll have tomorrow and can be well set up, well empowered to deliver. And any additional budget is then available for the actual change that you need to make happen and can be deployed towards that change rather than to unnecessary, you know, team size, for instance.

Anecdotally from my network, the impression I have from seeing the teams that I believe are performing well is that the most effective sustainability size for the team has a ratio of roughly 1.5 dedicated full-time employees for every billion dollars of revenue. I realise this is remarkably specific. Again, this may or may not apply to, to you or to your organisation. It has held true across most organisations that I've seen, certainly over the last couple of years, where, you know, if you think about an organisation that's maybe several hundred million dollars of revenue, often one full-time person can actually be enough for putting their arms around the challenge and managing the coordination and so on.

And again, this might be one entirely dedicated person, like a sustainability manager or something. But it could also be 70% of one person's time with a bit of help from others in the organisation, and that can generally work. And then, you know, this number, sort of also more or less scales, obviously, you know, take this with a bit of pinch of salt, right?

Maybe it's a bit higher, a bit lower, but roughly I've seen this is a reasonably decent rule of thumb. At the same time, I've seen some organisations that have a third of that. As a ratio to others that have, you know, four times or more. So I would say that you wanna make sure that you're landing somewhere within the right space when you are negotiating headcount budget internally.

Let's talk about that because again, this session is a little bit around just general norms and examples, but it's also supposed to give you a good set of tips for you to actually go and frame the work that you're doing. And so when you're negotiating headcount budget internally, I feel that it's always useful for you to go with industry benchmarks.

This is how most, most high performing management teams are used to working in the context of every other function. For the most established businesses at some point in their lifecycle,  and probably even at multiple points in their lifecycle, they will employ third parties to come in and help them figure out what the right size is for different functions and teams vs benchmarks from the industry. You can get ahead of that by bringing your own benchmarks. These can usually be fairly difficult to find externally. It's not like there's a good publication from a reliable source that gives you these benchmarks, but you can do a few things.

  1. Speak to your peers, customers and suppliers. There are a lot of sustainability conferences out there and you'll probably find that you'll get some pretty good insights from just the 20 companies that you have the best relationships with, and you can then cite this.In your internal discussions around how big the team should be, you can also go one step further in those conversations and you can try and understand within the context of the team who's doing what, how does the role work? How does role definition work? This is a really amorphous space where most organisations don't have a very clear idea of job descriptions.Which is kind of, you know, unfortunate because there are a lot of roles being advertised for sustainability professionals. Where the actual role doesn't match the job description or the job description is incomplete or very high level. And so I think there's generally a lot of room to move the effort forward by engaging with other companies and sharing notes on the size of the team and the focus and the roles.
  2. Linkedin search. Look up other organisations of similar size, similar shape, similar geography, and try and get a feel for how many people have a sustainability oriented designation or role type. And this will at least give you roughly a flavour of whether your existing team is severely underweight versus the type of challenge that your peers have identified. Or if your sustainability team is bizarrely five times the size. Of the peers that you're, you're competing with at a similar scale, for instance. So, uh, bringing those benchmarks is gonna be super important as you think of what the right size of team is, and by extension, how much budget you need to have available from your discretionary budget to deploy towards the sustainability team and the core people going into battle with you.

2. Maximising External Spend

Let's move on now to the next category of your discretionary spend which is around service providers and third parties that you're going to be working with. So within that, what I find is that most teams don't appropriately assess the value of their external spend. And they don't really think about this strategically.

There are a lot of examples that I've experienced recently or seen recently from the software space. You know, for example, I know one company that has a particular tool for Scope 1&2, and then they're using a different tool for Scope 3, and then they're using a different tool or service provider for lifecycle assessments.

And then they have  a third party consultant coming in to try and help them make sense of it all and consolidate it. It gets really messy and it probably still has gaps in what they're looking for. There's a lot of room for them to take a step back and almost clean sheet it and say, what do we actually need? What are the problems that we're solving? What are the capability gaps that we currently have? And where do we need to bring in expertise, uh, to solve those gaps within the expertise category?

Consultants vs Software

I often find that sustainability teams look for consultants where they should look for software. So for example, if you think of a predictable recurring task like emissions measurement in many organisations, this is a good software type challenge.

And actually bringing in a consultancy to do this re in a repeated way again and again and again. Is not the most efficient, way to work because it's a fresh exercise pretty much each time, which means that it takes up a lot of internal spend from your side in terms of your team capacity and the time and capacity that you're going to call on your colleagues for.

And so that internal spend actually ends up becoming big. And actually you're not getting any repeat advantage from that. So that's a good example of where you should devote your budget to software rather than to, for example, a consultancy.

By contrast, often the same sustainability teams lean on software providers and software support teams where they should seek consultants. So, for example, they'll have, let's say, a software provider working with them on a particular challenge, but they'll lean on that software provider for, ad hoc, subjective ad hoc tasks, or subjective one-off tasks.

Like for example, target setting software can be a great place to store targets and even, you know, to some extent build and share and collaborate on targets. It's usually a difficult context in which to summarise all of the business assumptions that you're going to need to have involved in target setting without the support of extensive human input where some human being needs to start go routing around and facilitating all the conversations and collaborating and making sure that stakeholder alignment happens at the management level and the board level and so on. And so rather than calling on software support teams again and again and again to help you with these challenges, you are better off actually engaging a consultant.

And the reason for that is that often software support hours can become more expensive on an hourly basis than consultant support hours because it's not part of the core operating model of the software provider. And so ideally, you want to work with different types of third party in their specialised skillset.

Software providers will be happiest if you work with them in the context of their software. Consultancies will be happiest if you work with them in the context of big picture strategic topics.

Usually I say this not just as a former consultant, but knowing many other consultants in many other firms, most of them are excited and get out of bed for the big strategic challenges rather than repeat, mundane tasks that many of them would rather you used software for. So I would just think about about that.

Internal vs external spend

Another aspect while we're talking about internal and external spend is that I often find that sustainability teams and frankly, business teams in general tend to discount internal spend versus external spend.

What I mean by that is that if a particular task or activity is going to take  let's say, A hundred dollars worth of someone's time inside the business and a hundred dollars worth of an external provider or a third party, they will tend to mentally or literally in an actual table, discount the one hundred dollars internal spend or treat it as a lower cost to the business versus the external spend.

And that's not wrong. In a lot of ways that makes sense. And in a lot of ways, you know, that a hundred dollars may actually work out to be cheaper because you squeeze into people's marginal time, for instance. Or you can kind of make it work in the context of an overall work package. But you wanna understand what that discount is because often sustainability teams land in the wrong place in terms of the trade off. They try and, let's say save $20,000 worth of external spend. By minimising the use of consultants or minimising the use of software, and they end up creating a hundred thousand dollars of internal spend because now they're trying to get people who aren't well versed in the tasks that they need to really start focusing on something entirely different.

And there's a learning curve and there's redundant time and so on. And so just understanding what that discount is that you or your organisation are going to apply is useful also in the context of making a business case. And we'll talk about that a little more in, in a separate session.

Substance vs style:

Lastly, just in this sort of topic, even though sustainability is a design heavy space, A lot of us are you know, already used to the idea of slick high quality sustainability reports.

I still see a general absence in high quality compelling design work, and I find that this is less true in the largest companies like Fortune 100 companies that have the cash, the experience, the PR department and the marketing department to facilitate going out and producing really high quality visual materials.

And it's less true also in small consumer oriented, let's say fashion apparel sorts of businesses, creative industry businesses. Where again, the value of high quality design and visual content is well established. But I find that this absence of good quality design work is true in the sort of the middle of the range between these two.

So like, you know, a billion dollar revenue business, a half a billion dollar revenue business, you know, anywhere up to maybe 10, 15, uh, $20 billion of revenue, I often find they under index on high quality visual materials to communicate their sustainability vision and strategy, both internally and externally.

I am fully on board with the idea of spending money on substance rather than style. But sometimes style is important, and this is because it gives you the goodwill, it buys you the goodwill from others to really go for substance. And so, you know, I would say having a good visual designer on board early  in your sustainability journey and trajectory, and especially someone who understands the vision and understands what you're trying to communicate, having that person involved early is going to pay dividends later because it will help you land your message internally and externally and you want that person again, just to repeat.

You want that person to understand what you're trying to achieve. And you wanna work with the same person over time because a message is about narrative as much as it is about visual content. And so you wanna make sure that you have someone who captures where you're going with this and can land the right messages in the right way.

Just to summarise a little on this sort of external spend piece, right? We've, we've talked, you know, about software and consultants and designers and so on, and, uh, what I would say is that for all your external spend, take a return on investment approach, build the model, make the case, contrast interventions against each other, you know, potentially use a marginal abatement cost curve to do that, or a similar logic, and the exercise in itself will help you start to speak to your team and others in terms of value creation, and it'll help you align other business stakeholders.

Most of us in sustainability don't do this enough, and most of us will frankly continue not doing this enough until finance teams keep pushing back on our interventions and we start to change how we communicate.So would just sort of bear that, bear that return on investment logic in mind with all the external spend as well.

3. Unlocking project spend for scale ups

Let's now talk about, um, unlocking the value from project spending. And so let me start, let me just maybe start with what I mean by project spending. I find that most sustainability teams have some element of discretionary project spend or some element of spend that the organisation is willing to give them to spend on discreet projects.

And I find that a lot of teams will think in a very short term, immediate lens. On how they deploy that. Whereas actually the teams that go the furthest are the those that are very intentional in how they deploy it. They think about how to use project spending to unlock more spending for the scale up to unlock more budget for the scale up.

They see the project, not as a pilot for a large abstract intervention that is going to be multi-stakeholder and no one is ever gonna buy in. But more like if you were actually setting up a startup business within your business, and you actually had certain stage gates and  you have a realistic shot at unlocking a scale up at the conclusion of the first stage gate.

How would you approach this?

And so let me give a few thoughts on how, how I would approach this, not just as an, as an advisor and someone who's worked with sustainability teams. But also, frankly, as, as the founder of a sustainability, uh, startup myself. So I would sort of think about three things.

  1. Promise of cashflow:Anyone who's been following my content, whether this podcast or otherwise, will be familiar with the fact that I basically always talk about money. And I realized that that seems somewhat weird and somewhat mercenary and. Uh, you know, I, I appreciate all this stuff about not being able to serve God and mammon, for instance, but like, I, I honestly think we don't talk enough about money when we're trying to get sustainability stuff done.I would look to where the cash flow streams are that are going to come from the project that you're deploying. Maybe not in, its in, in its incarnation as a project, but in its scale up mode. So the best sustainability interventions should eventually pay for themselves in some shape or form, either a cost reduction or a new revenue stream.So the promise of cash flow is gonna be important.
  2. Defining who the entrepreneur is:The next thing I would think about is who is the entrepreneur that you're putting behind this initiative? And I do not mean you need to hire someone externally. This can be someone within the sustainability team. Even better. It can be someone outside the sustainability team and in some other function within the business.This person does, however, need to be wedded to the long-term vision of what you're trying to achieve. I found sometimes the most excited, most passionate, most capable people to involve can be the engineers. For instance, within a manufacturing oriented business, where you might often find someone who's really committed to a particular type of technology application or a particular type of approach, and in the back of their mind, they've often had like, why doesn't my company take this seriously?It would save money and it would also save emissions, for instance. And you can, if you can find that person and you can bring them in and you can say, look, this may be a side hustle, but we'd love for you to own this project and be involved in it. And the win for you is also, if this works, then you can actually make, make a new, you know, make a new revenue stream, make a new business out of this within our organisation.

Example: I think about a life sciences business that I know which specialises in, you have a whole range of products and they're, I think, especially well known for providing inputs into the agriculture industry, whether it's new feeds, new additives, new formulations, etc. And within that business, uh, it merged with multiple businesses and they found this one person in the, one of the companies that they'd merged with who is super passionate about driving down emissions for livestock, and they gave this person the task of figuring out what they do with all the data that they have sitting around. And how do they monetise this data and how do they use it to engage customers in the livestock industry where they could maybe build a new business line?And this person has now over time, assembled a 2030 person team around them? They're out there at the conferences. They're out there pitching the idea to customers and they're really generating a lot of positive brand, um, for this business with its customers, and they're developing effectively a new business.That sort of person is who you want involved owning this new project that you're starting with and owning the vision for scaling it up.We've talked a bit about promise of cash flow and the entrepreneur or the owner.3. Pragmatic innovation:I find that sustainability teams, like many startups, frankly, often make the mistake of innovating on two fronts simultaneously, you are trying to find a cashflow stream that doesn't exist, and you are trying to deploy a technology that hasn't really been tested.This is a surefire way to make your job twice as hard or maybe even four times as hard, uh, and increase your chances of failure. And so what I would look to do is innovate on one of these two streams. For instance, let me give an example. I see a lot of companies in the apparel space and I also see a lot of really promising startups in the apparel space.

And if you think abou two trajectories or two directions of travel around how you minimise increase the circularity of apparel products, you can have, apparel sharing, and you can have apparel resale. And these two are actually quite different. We may think of them the same way, but they're actually quite different.One is around, how do I lend you my parts of my wardrobe? And you'll then kind of return the part of that item, you know, I'm lending you, let's say a, you know, a, a suit or, or a dress or something, and you'll kind of, you'll use it and then you'll return it to me, and then it gets lent out to someone else. That's kind of one model.The other is just a simple resale model where it's, it's still effectively a one-way transaction. It's just of something that's been used, but it's a sale. You're not expecting the person that you sell it to necessarily to be the one who returns it to you. And in these two cases, one of them is significantly more complex than the other.

Can you guess which one it is?

It's the first. Just spoiler. It's the first. And the reason is that in the first one, you're innovating in multiple directions all at once. You are trying to get the whole logistics route to work where you're, you're sending something out, you're getting it back. And that needs to work not just efficiently and at quality, but also cost effectively at the same time, you are also trying to make sure that the product is cleaned, not just once, but multiple times, so that it can constantly be sanitary and you know, safe for the other person to use and appealing as well. You're innovating on all of these fronts. You're also, at the same time as you're managing these complex logistical challenges, you're also trying to innovate on consumer preferences where you're trying to get the consumer comfortable with the idea that they're going to be using something that has already been used. So you have twice as many. You have two, two different sets of challenge or innovation that you're managing at the same time.In the second example, you are actually only really managing one of those. Primarily what you're managing for is the consumer behaviour aspect, which is, am I comfortable wearing something that has already been worn before?And for the rest of it, it's, it's basically again, a one-way traffic effectively, right? You don't have to keep the repeat aspect of cleaning and, and logistics and so on. It's a lot simpler. And so I would encourage all sustainability teams when they think about projects that they would like to scale up to be pragmatic in what types of innovation they're trying to explore and deploy to, to not innovate on too many fronts at the same time, it just makes life harder and increases the risk of failure.

So hopefully that, that  makes some sense in terms of how you're going to think about projects.

You should bear in mind that you kind of want to make sure you, you identify future cash flows. You identify an entrepreneur or owner of the project and you focus on, on pragmatic innovations that you're going to, uh, you're going to go out to market with.Note that this doesn't mean that the sustainability team needs to fully keep the project within its own boundaries. You don't need to, for example, build the new products that you want to put out into the world. But you can be the one to initiate the conceptualisation and the market research and defining the needs from a prototype perspective.

And then ideally, you should actually be able to start influencing other parts of the organisation to take your ideas, maybe your projects to scale up or even to be involved in the project delivery themselves, and that'll help you start spreading the load when it comes to budgets, time, energy, resources of different types.

4. Budgets you influence

So, Let's talk about the budget that you influence. We've talked a bit, uh, about the budget that you have directly in your control and the stuff that is your discretionary spend. And now we're gonna talk about the budgets that actually aren't in your control, but that you might have the potential to influence and to sort of leverage for the achievement of your sustainability goals.

Let's first look at kind of what your goals and priorities are when it comes to different budget owning functions. You should, again, start with business value and you should understand the motivations of your business, the KPIs and, and the goals of the overall business, but also of the specific functions that you're going to be working with because you're going to need to relate to individual functions in the context of their goals rather than your goals.

In some cases, one of your initiatives, for instance, may actually have dependencies on multiple functions, and so you're going to need to communicate your initiative in the context of their goals, and that's gonna be a big challenge for you. But the upside is that if you get it right, you can also often persuade them to deploy aspects of their budget, which will usually be more considerable than yours, towards achieving the goals of this initiative that you've created.

Business example: So what I'm gonna do is I'm gonna take a business example, and then I, I want to work it all the way through with you  across the different functions that you might be involving. So this is a  fairly common initiative. Let's say you are a beverage business. You are in alcoholic beverages, spirits, soft drinks, whatever it might be, and there's a category of intervention for you that is product redesign.

This will usually include some aspect of packaging because in the beverage industry, a lot of the emissions contribution, for example, is coming from the actual packaging material that you're using, whether it's glass or aluminum or plastic or whatever. And so the, the product redesign is often about the packaging that you're gonna use.

Let's say that within this category, you've identified an intervention that you think is really promising you want to optimise the size of the stem. And so if you think of the stem of like a, a beer bottle, for example, the stem represents a lot of packaging for very little volume, very little product volume. The ratio of packaging content to actually what you want to be using under that product is much worse than it is for the rest of the, the, the bottle. And so you wanna optimise the dimensions of the bottle. For example, either the, the shape or the stem. You wanna optimise some of that aspect to improve the volume ratios.

The R&D function

And so let's walk through what this means for different functions. I wanna start with R&D. So here's how I see this playing out with the R&D function. From an R&D perspective, you already identify within the sustainability team that there will likely be concerns around how the product tastes. Is this change going to impact not just the taste, but even, even maybe how the consumer perceives,  or experiences the product? You know, think about someone going out to a football match, right? And they wanna hold the beer by the stem, right? Maybe there are other examples as well.

But there's this whole aspect of the customer experience and the product experience by that customer that you as the sustainability team don't really understand and may not have all the right resources and capabilities to bottom out. So you are going to need the help of R&D to solve for these questions.

But how do you get R&D excited and engaged enough to be involved with you and to work hand in glove? You need to understand their motivations. You need to understand how your product redesign intervention can lead to a win for them. It's not good enough for you to say, we're doing this for the planet. It needs to work for their KPIs, because you're going to ask them for their resources, whether it's time, money, or expertise. And so one of the important  things is to figure out. How is the R&D team incentivised now? Maybe the R&Dteam, for instance, has some sort of a, uh, a K P I related to a, a, a new product development.

Can they create a new format for SKU and can they hit certain levels of sales numbers for that new sku, for example? And that's, that's linked back to the incentives of the r and d team. In that instance, can you actually help build the fact base for the r and d team by already maybe even canvassing some consumers from the sustainability angle, asking consumers if they would be more likely to buy a certain variation of product at the same price if they knew that it had a lower emissions footprint.

But it looked different or felt different in the hand. And actually, if you, if you build that, you know, pre-business case almost, if you build that fact base and take it to the r and d team, you've done them a favour by doing a early part of their work for them. And you've established the commonality of language with them that will help them already understand that you're kind of on the same wavelength in this.

And so you can start moving in the same direction. Let's move on to see how this plays out with the operations function. So your new product design works just fine from a taste and preference perspective. It's not expected to negatively affect consumer buying patterns. You hope consumers will love it.

You're not sure, but you're reasonably confident that they won't dislike it or you won't have a negative impact on sales, for instance. But you've ended up changing the shape of the bottle. And while this may optimise material use, It might affect the efficiency of the crates that you're using to transport those bottles.

Operations function

So this is now looking like an operational question. It's not one necessarily for the R&D team to solve because the operations team is what deals with packing, packing up the product and getting it to distribution. In this case, what makes your operations team tick? Does the upside in having less product mass to transport make up for the downside in having to use more crates per unit of product?

How do you make this a win for operations? Which helps get them more aligned and also helps you find a home for any of the additional, let's say, transport related costs or, you know,  create related costs that you might have so that this doesn't need to come out of your budget, your discretionary budget as a sustainability team, but can instead be owned by operations, making this a win for operations in some shape or form, whether it's fuel, cost or material wastage or otherwise.

We'll help make this a win for you as well, but more importantly, we'll get them aligned for the longer term. Always remember the people you're working with on your early initiatives are likely the same ones you're going to work with all the way through your sustainability program. And so building goodwill early is always super important.

Procurement function

Let's now move to the third type of function that you're most commonly gonna be working with and in a way this is probably the most important because for most, almost every company, pretty much, right, there are probably some exceptions, but they don't come to mind right now for pretty much every company, 85, 90% plus of your emissions are going to be supply chain oriented emissions.

Uh, and so being able to work with the procurement team and the purchasing team and function within your organisation is always gonna be important. So let's take the same initiative. You've rounded out with the R&D team. You know, the product tastes fine, feels fine to consumers. You've managed the operational aspects.

But you still need to find a supplier who's going to work with you on this new bottle type because what you've redesigned and you need a bit of help from, from your friends in the business have designed that's maybe not fully conventional, or at least it's not what your business has been used to buying.

And so you actually now need to find a collaborative vendor who's gonna work with you on, you know, effectively, again, taking a bet and, and, and creating something new. So you are going to engage them in the discussion and if you engage them directly yourselves as the sustainability team this will probably come down again to cost.

And so as a sustainability team, you can try and work directly with the sustainability team on the side of the vendor. But they also have limited budget. And so what they're gonna want to do is involve their commercial team. So you end up with this interesting dynamic of you and your sustainability team speaking to the commercial team of your supplier.

And what they're gonna come back to you with is, you know, we love the idea of fantastic. Great for the world, great for, you know, great for the, the consumer. Brilliant. It's gonna cost more. And are you guys ready to pay up And. At this point, or even frankly earlier than this point, you will wish that you'd involved your procurement function in this conversation as well.

And the reason is that your procurement team will not only have a much larger budget, which can absorb these element. There are also several other levers that they have available, which they can use to influence your packaging vendor:

  1. The size of the contract
  2. Duration of the contract

There may well be others... These will be visible to the procurement function, but not visible typically to you as the sustainability team. So here you now need to again think is there a win for the procurement team, where, you know, maybe you can, this new product that you've designed can actually reduce the amount of packaging content required per unit of product for your business, and that helps the, the procurement team hit their KPI which is, you know, 15% cost reduction, year on year, for instance, across packaging material, right? Probably that's a bit on the high side, but you know, I imagine that they will have their own KPI for cost reduction, and if you can actually help them hit that overall in terms of net material, then uh, leaning forward a bit on a new product specification might actually seem like a great bargain to them as well.

And so, you know, just to round out a little on kind of having talked through, how you work with the R&D team, how you work with the operations team and how you work with the procurement team. You want to make the most of existing budgets before you use up your own much more scarce sustainability budget.

And by doing that, and, you know, rough, rough estimate is that these other budgets that we've talked about R^D, operations and procurement are going to be not just 10 or 20 times bigger than yours, but you know, a hundred times right, or, or more in magnitude versus your budget. There is much more space to absorb a lot of these costs and expenditures in those budgets than there is in yours.

And so you definitely want to start engaging these stakeholders early, even if what you're looking at scoping out is, um, is a pilot initiative, right? Or, or just something to get going with and to test. You still want to try and tap into these other budgets as much as you can.


So just to summarise what we've covered: hat I really wanted to do is to dive into all things sustainability, budget related to help you figure out how to get the most out of the resources available to you.

In the fulfilment of what is likely to be an expensive sustainability program for all of us, right? Every business is going through this and one where it, it will feel like both a marathon and a sprint, frankly, where you're, you're kind of having to go faster than your organisation is used to in terms of sustainability change, but you're also have to gonna have to keep that pace going for longer than most transformations last in your organisation.

And so, In this context, what we've talked about is the two big buckets to think about. One definitely smaller than the other. The smaller one is the discretionary budget that you have available, which is typically head count, external spend, a lot of it on services and then project spend, those, those typical categories, uh, and then the much larger budgetary pool, which is where you don't have direct control, but you have influence.

And that's, you know, often gonna be R&D, operations, procurement, maybe a few other categories. And what we've tried to focus on is how can you think about getting the most out of the resources that you have full control over? And how can you really set up, for example, the right strategy to work with to build your own team and the right size of a team to build.

And how do you then approach, for example, working with external partners and optimise where you use software versus where you use consultants. And how you think about internal or external spend.

Then we've talked about how you look at project setup, for instance, and how you try and identify cash flow streams that the project will benefit from. Identifying an entrepreneur owner to lead the project. And then really think about how you're gonna bring that project to scale by using a pragmatic choice of innovations. Snd then in terms of influencing other budgetary categories, we've talked about how you try and focus on speaking the same language as the other function, helping them hit their KPIs, involving them early, involving them consistently, uh, because you're going to need their support going forward.

So hopefully this has been helpful for you. A key element of your approach to budgets is going to be thinking through business case development and carbon prices. Stay watchful for that episode as well. We'll cover those topics in detail also. But if you have any other questions in the meantime, you know, thanks for listening to today's episode and for any of the questions that you have, uh, just drop me a message, uh, or join one of any of the monthly LinkedIn lives that we run, uh, which you can find on my LinkedIn.

Feel free to follow me if you are excited by some of the content that I'm sharing and want to hear more. Thank you so much.

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