Aligning Sustainability Incentives
I’ve long preached that there is a pressing need to align responsibility for Sustainability with authority. There is no point in delegating responsibility for Sustainability targets to environmental managers, or worse, volunteer sustainability champions, if they have zero power to actually make change happen. Instead appropriate sub-targets must be embedded in the personal objectives of key decision makers. Stands to reason, but often neglected.
During the Corporate Sustainability Mastermind Group on Tuesday (more on this next week), I realised that this alignment principle doesn’t only within organisations but also between them.
If a landlord is responsible for a heating system, but the tenants pay the bills, the landlord will go cheap on the system as efficiency is not their problem. If the heating bills are split equally between tenants rather than individually metered, then there is less immediate incentive to cut consumption. If a purchaser is responsible for disposing of packaging, then there is little incentive for the supplier to provide recyclable or returnable packaging. And, as the Carbon Trust found with Walker’s Crisps, if potatoes are bought by wet weight, then suppliers are incentivised to artificially hydrate the potatoes even though Walker then has to waste energy evaporating off that excess water during the frying process.
In all these cases, there are ways and means of changing the agreements between the different parties so those who have the power to change are fully incentivised to do so, either financially or contractually.