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Calendar Posted 6 February 2014 | Feed Icon | Calendar 0 Comments

"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty" (Sir Winston Churchill)

Against an ongoing background discussion on the role of public sector spending in a recovering post-recession economy, many governments around the world have committed themselves to spending reviews.

The UK has adopted ambitious public sector spending cuts, now in their fourth year of implementation. With few exceptions all Government departments still face cuts, the scale of which goes well beyond the reach of mere efficiency measures.

For the private sector, such an approach to austerity in difficult times is nothing new. But from Whitehall to Town Halls, from board rooms to factory floors an austerity agenda presents an opportunity to reconsider the more profligate business models and process.

Food production, water scarcity, inequality, climate change, energy security, disease and natural resource shortages; these are the seemingly expensive challenges on a grand scale which we must continue to address whilst making the books balance once again.

The sustainability agenda is concerned not just about doing more with less, but finding better ways to do things. This paper applies lessons from sustainability to spending cuts, in search of doing better. It identifies four areas in which cost savings can help improve the long-term viability of an organisation. It is aimed at those who need to achieve cost savings, but believe there is a more intelligent approach than simply swinging the axe.

Introduction

Austerity should drive intelligent efficiencies in the short term. But something more is required if long term aspirations for the organisations are to be met. Sustainability can drive innovation and entrepreneurialism whilst achieving efficiencies. This relates to necessity being the mother of invention and how you achieve more with less. Organisations need to do more than hope that adversity drives innovation; they must create the circumstances to facilitate it.

There is therefore a need to create a culture of ideas generation and discussion paralleling the Government?s "Spending Challenge".

The process of identifying spending cuts is an excellent opportunity to reflect on the fundamental purpose of an organisation. Those looking for medium term growth in size, turnover or scale of delivery, need to consider what the purpose of that growth is? All organisations exist primarily to enhance quality of life in some way. Once that goal is recognised the mechanism by which it is achieved can be determined

Corporate sustainability encourages a complete understanding of operations now and into the future and seeks to adapt internal process providing an enduring, balanced approach to economic activity, environmental responsibility and social stewardship.

These points may be of philosophical interest in abstract, but are only of value when grounded in reality. This document therefore sets out the basis of a practical approach, seeking benefits from the austerity agenda in:

? Strategy

? Innovation

? Process efficiency

? Resource efficiency

The Model

There are four areas in which the drivers of sustainability and austerity can be easily aligned. These are mapped below and provide the structure for this document.

These four elements represent the greatest synergies between the objectives of spending cuts and sustainability. Each of these presents an area in which cost management may provide the catalyst for finding new and better ways of doing business or delivering services.

The order usually begins with a review of strategy as with current austerity measures; however, in some instances innovation can be a viable starting point. These elements are now considered in turn.

Strategy

Innovation

Process Efficiency

Checklist

This checklist provides simple questions to help establish whether your organisation is likely to achieve the greatest benefits from necessary austerity.

Strategy

1. Is there a proper strategic approach to corporate sustainability in your organisation?

2. Are sustainability goals directly linked to and driven by overarching corporate strategy?

3. Have strategic goals been reviewed in light of recent spending cuts?

4. Are the resources still going to be available to deliver the strategy?

Innovation

1. Has there been a structured approach for engaging staff ideas for ways to reduce costs?

2. Are all staff aware of the sustainability strategy and their role in delivering it?

3. Are staff supported and rewarded for finding efficiencies and better ways of delivering organisational objectives?

Process efficiency

1. Are all business functions that are currently undertaken necessary to achieving the fundamental purpose of the organisation?

2. Do all business functions enable effective and efficient progression towards the fundamental purpose of the organisation?

3. Do any business functions exist entirely to facilitate a link between business functions?

Resource efficiency

1. Is the relationship between the outputs of the organisation and that of its inputs acceptable?

2. Does an analysis of inputs and outputs present an imbalance? For example; unnecessarily high overheads, under-utilisation or significant raw material or energy wastage.

3. Can comparisons be sought of resource use models at similar scope organisations?

Conclusions / Summary

There is a true synergy between intelligent cost management and some elements of sustainable development. Reengineering systems, processes and organisations to meet sustainability targets can generate cost savings. Reengineering to reduce cost can give rise to more sustainable outcomes. But this won?t happen by accident.

An organisation can cut costs in a downward spiral of worsening performance or create a virtuous circle where sustainability and cost targets are driven concomitantly for the benefit of all.

There is benefit in recognising and nurturing the drivers of sustainable growth. These include:

Further benefits of this approach include:

The metaphor of weight loss is often invoked to describe spending cuts. Companies "become less flabby", processes "more lean". It is a well suited analogue which bears further consideration. Crash diets may lead to rapid unhealthy weight loss which cannot be sustained and are usually followed by rapid weight gain. This is because consideration is not given to the overall goals of the system, the focus instead being placed exclusively on just one part. This corresponds to the hatchet approach to spending cuts.

Alternatively, weight loss through a lifestyle transformation of better diet and more exercise addresses the holistic needs of the system and can therefore have lasting and positive benefits. This corresponds to a more thoughtful and strategic approach to cost management and efficiency, characterised by a desire to make fundamental and often difficult changes which put the system into balance.

Appendix 1

Further Examples:

Additional Concepts

ENDS

Author Contact : Mark Hedges (Cala Sustain)

Follow Cala Sustain for further resource, tools, discussion and useful links at:

www.calusustain.com

by M Hedges and Del Redvers | 6 February 2014

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