ComplianceOctober 30, 2018

Melanie George Smith: Importance of Sustainability in Business Strategy

Melanie George Smith is the founder and president of Sustainable World Strategies, which advises companies on the value and implementation of sustainability. She is also a recently retired Delaware state representative and has been an attorney for 20 years. During her time as state representative, Ms. Smith served as chair of the House Judiciary Committee and was a prime sponsor of the annual Delaware corporate law updates. Ms. Smith was also prime sponsor of the newly enacted Delaware Certificate of Adoption of Transparency and Sustainability Standards law.

In this podcast, Ms. Smith clears up some common misconceptions around the topic of global sustainability. She explains why for many Fortune 500 companies, sustainability has become a necessary and integral party of their business strategy and how it can represent a win-win scenario for even small- and medium-sized businesses. Lastly, she provides pointers on how a business may demonstrate its commitment to sustainability to its consumers, employees, and investors.

To learn more about the work of Sustainable World Strategies, you may contact Ms. Smith at [email protected].


Greg Corombos: Hi, I'm Greg Corombos. Our guest this week on Expert Insights is Melanie George Smith. She is an attorney. She has served as a state representative in the Delaware House of Representatives for the past 16 years and is founder and president of Sustainable World Strategies. And sustainability is our topic for today's podcast. And Melanie, it's great to have you with us. Thanks for your time today.

Melanie Smith: Thanks, Greg. It's my pleasure.

Greg Corombos: Well, when we talk about sustainability, let's start big and then zoom in as our time goes by here today. First of all, how do you even define global sustainability?

Melanie Smith: Sure. So sustainability really could be looked at in two different ways. The first one is that you can look at your impact on the environment, on social--which is people--and on the governance economy aspect of it. And when I say you, I mean literally, the individual listening to this, the family members, the businesses, the government's nonprofits, it really applies to anyone who's operating.

And it really is just to take into consideration your impact on those three key areas. ESG, environment, social and government, Environment sort of speaks for itself. So it's like, if you're a company and you have a fleet, it's making sure that your fleet is as efficient as possible. The people part of it means making sure that you're taking care of the employees, as well as your supply chain employees. So it's having diversity in leadership, gender equality. It's making sure that you're paying a livable wage at the lowest level.

And just as importantly, it's making sure that the inputs that you're purchasing are not being made, manufactured, with child labor, or traffic labor from around the world.

And then the third piece of it, governance, which is sometimes referred to alternatively as the economy, that's sort of integrity in the boardroom. It is a commitment at the board level, at the C-suite level to sustainability.

It's looked at as an operating entity, are you making the community in which you're operating better off for your operations being there or worse off. Are you stripping the community of all of its natural resources, and then sending all the profits out of the community?

Or are you doing worker training, education, giving back to the community, etc. So those are the three impacts that we can look at when we define global sustainability.

Now, there's a second way that I like to look at global sustainability. And that is, it really is innovating to solve world problems through your organization, whether its products, services, or processes. So for example, the University of South Africa partner with various multinational court operations. And the challenge was to identify some issues in Africa that needed a solution. And the one that I remember distinctly was from University of South Africa, students identify the issue of food aid spoiling before it reaches its destination as a significant problem in Africa that needed to be solved. So through company-funded research, they came up with a solution. The company then took that solution, which had to do with, you know, some sort of sensor to let you know when the grain is about to go bad, or when the food is about to spoil in the warehouse so that it could be quickly shipped out, this company then took that information and is turning it into smart refrigerators that, frankly, should be on the market any day now, if they're not already. So that refrigerator that you or I could purchase tells you when the broccoli and the chicken are about to go bad. And it sends you an email letting you know a recipe to use up all of the items in your refrigerator that are about to go back.

So that's an example of a mindset of global sustainability that this partnership, this collaboration had between the company and the students from the University of South Africa. It was a mindset of how can we solve this world problem, this problem in Africa around food distribution, and how could the company make money off of that at the same time, so it's a win-win solution.

Greg Corombos: That's a fascinating example of how this works to not only better your neighbors and better the community, but also, I would imagine, improve your bottom line. That's going to be a product that people want, I think people would like to know when things are going to go bad. Some people might like an email just to know that something still in their fridge that they forgot about from a couple of weeks ago.

Melanie Smith: Right.

Greg Corombos: Let's help that technology comes along as well. But I think that innovation leads into our into our next answer, at least, to some extent. And that's why a company should care about sustainability. Because if there is profit in it, that's obviously an added incentive. But it's not the only incentive. And there's so many different people involved in various relationships for a business. There's the people who, who fund them, the donors, the investors, for example. There's the people who work there, there's the customers, but ultimately, the bottom line is the bottom line if you want to stay in business. So explain why a company should care so much about sustainability.

Melanie Smith: Sure. Um, sustainability is win-win. It really is important that when folks are listening to this, that they recognize, this is not some movement to take money from the rich, or those who have it and redistribute it to the poor. It's also not a movement to necessarily save the polar bears. This is a very direct, relevant movement--global sustainability--that will help each and every one of us.

So here's how. You had touched on some of the different stakeholders for any organization. Let's start with the investors. So many investors now are starting to look to companies to fund that are sustainable. The research is starting to show that companies that are committed to global sustainability through the core, not just using it as a marketing tool, but through the core, are actually yielding greater rates of returns than companies that are not committed to sustainability. I was just at a conference up in New York City, and a Harvard professor was actually sharing her research to that effect with the audience. So it's very relevant, and very real time research that shows that connection, and the investors know it. So many investors, not all, but many investors really are looking to invest in sustainable companies.

Then you have your employees. Millennials, especially, are really looking to work for and at organizations that have a purpose. It's often called conscious capitalism, social impact, social venture, many different ways to describe it. But the bottom line is, millennials in particular, are very much driving a movement around global sustainability. And by 2025, 75% of the workforce is going to be millennials. That's six or seven years away. So in order to attract and retain top talent, companies really need to adopt global sustainability strategies, consider the purpose or higher purpose beyond profit, all in an effort to really capture the next generation of talent that's coming out.

And then thirdly, the consumers. And that's both business to business and business to consumers, so B2B and B2C. Now, in the B2B world, the big companies, the larger Fortune 500 companies, are mostly committed to global system inability already. So you have 90% of the Fortune 500 companies, nearly 90% are already committed to global sustainability. They are starting to push that downward into their supply chain, because they're only as sustainable as their weakest link. So it's important for these large companies to work with their suppliers and to let their suppliers know that they really need to adopt global sustainability strategies in order to continue supplying the large company with its materials or inputs.

So you have a lot of smaller and medium-sized companies that all of a sudden are sort of being thrust into global sustainability--is being thrust upon them--and in order for them to survive in this marketplace, they need to then think about global sustainability.

And then lastly, the business to consumer, the B2C part of it, that's where we have now consumers really doing a lot of research, particularly parents around what is safe for their children to eat, to wear, to sleep in, to run across, you know, lawns that have been fertilized. Parents and consumers are really starting to educate themselves around the health impacts of stuff that we use every day, of products that we use, services that we use, and they're starting to demand that these materials that they put in front of their kids and on their kids and in their kids are safe and healthy. So from that perspective, there's also a growing demand for sustainable products.

Greg Corombos: We're talking with Melanie George Smith, she's an attorney, she is a Delaware State Representative, and she is the founder and president of Sustainable World Strategies. Melanie, just a couple minutes left here in our podcast. So I want to get to some of the work that you've done as a legislator, because during that time you sponsored the Delaware Certificate of Adoption of Transparency and Sustainability Standards. Explain what that is a little bit and what difference it's making.

Melanie Smith: Sure. So the certificate is a certificate from the Delaware Secretary of State to Delaware entities that are committed to sustainability. It's a fairly simple process to a team. And I'm going to simplify it. But there's really two things that a Delaware entity needs to do. One is to adopt board resolutions committing to sustainability. And the second is to be completely transparent around the sustainability efforts.

So why does this matter? It really gives the marketplace and apples to apples comparison of a company's level of commitment to sustainability. There is a significance of having a board pass a resolution commitment to sustainability that is very different than if you had a plant manager or a division director or vice president adopting a sustainability program or wanting to do so. It may or may not get funded. If that person if that employee leaves the program may leave with them, it may die. But having a commitment at the board level, that is a different story.

That means that sustainability initiatives will be measured, which is the first process for accountability, will be funded and will be committed to. So having a board commit to sustainability is a very strong indicator of a company's commitment to sustainability.

And then second, being transparent around what an organization is doing around sustainability is really important to showing their commitment to sustainability. Because it really sets them apart from those bad actors, if you will, that really just want to get the marketing bump from calling themselves sustainable. So if you get a Delaware sustainability certificate, that will say to the world, hey, I'm willing to be an open book, you can take a look at what I'm doing around sustainability. You can see the standards I've adopted, the metrics. our performance. We're willing to show you what we're doing; we are not just using this as a marketing tool.

So we believe it will come to a point where companies that don't have the Delaware certificate, you know, when when they go to get financing or or other kinds of deals, then the question will come up, why don't you have a Delaware certificate? Are you really committed to sustainability? Or is this sort of just in name only. And so we believe that the Delaware certificate really offer the marketplace some important information around value in the company's commitment level of commitment to sustainability.

Greg Corombos: Melanie, it's fascinating not only to hear you walk through this in a very organized fashion, but to understand just how much progress has already been made on this front. But you mentioned the kind of the top-down viewpoint on this from the big corporations down to the medium and smaller ones. So what are your final thoughts here as we as we run out of time, but about where you see this going here in the short and long term, real quick?

Melanie Smith: I think that DSM North America and their president Hugh Welsh has set the bar very, very high. DSM North America was the first company to obtain the Delaware certificate. And I think they're leading the way because they're very committed to sustainability and innovation. And I believe that other companies and other organization as they see the value of the dollar certificate and avail themselves of this opportunity will also take take advantage of getting the Delaware certificate.

Greg Corombos: Absolutely fascinating to learn about Melanie. Anything else you'd like to add before we close here?

Melanie Smith: The train has left the station around sustainability. And this way of thinking will permeate the world in the near future. And companies and organizations that don't take the time now to learn about what it is, and how it can provide value to their organization, and then take steps to become sustainable, will go out of business or be left behind.

Greg Corombos: Okay, can’t make it any clearer than that. Melanie, thanks so much for your time today. We greatly appreciate it.

Melanie Smith: Thank you very much, Greg.

Greg Corombos: Melanie George Smith is a Delaware State Representative. She's an attorney and the founder and president of Sustainable World Strategies. I'm Greg Corombos reporting for Expert Insights.

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