‘Undershooters’: three companies who are showing sustainable operations can boost business performance
Large corporations have a lot to answer for on Overshoot Day.
A study published in 2017 found that 71 percent of all historical emissions can be traced to just 100 companies. And that is just carbon. A similar story occurs for resource utilisation: just twenty companies are responsible for over 55 percent of the world’s plastic waste.
Short-term profit chasing to overshoot revenue forecasts has led to an overshooting of a much more alarming kind, and with much longer-term consequences on the planet.
That said, it is easy to view the corporate sphere through a singular negative lens. But doing so overlooks some of those organisations who have responded to reduce the demand they place on nature.
These entities are scarce. Across the 9,000 companies rated by the CDP, a global environmental reporting NGO, only 13 have a ‘Triple A’ rating that reflects high performance across climate, forest, and water protection.
This piece looks at just three of those companies, and how they are demonstrating that it is possible to achieve strong business performance whilst making a positive contribution to the ecosphere.
LMVH Moët Hennessy Louis Vuitton (France)
Fashion represents 10 percent of all global CO2 emissions and sends 92 million tonnes of clothing to landfill per year. Given the scale of potential destruction, it is critical that the sector’s heavyweights make efforts to minimise their footprint.
LMVH, the world’s largest high-quality products group, has introduced a ‘LIFE 360’ strategy aimed at doing just that.
It is achieving meaningful results.
High investment into renewables means the company now powers approximately half of its operations on clean power. Even more impressive is the group’s activity in carbon reduction far beyond their main operations. Louis Vuitton, the designer fashion label, has become a world leader in developing Sustainable Aviation Fuels (SAF).
LVMH also thinks more broadly about its impact on biodiversity. Through a partnership with UNESCO, the group reforested 1.3 million hectares of land in 2022, a land area comparable in size to the state of Connecticut.
Circular products are also a strategic priority. Christian Dior, another group company, launched a fashion collection last year developed from marine plastic waste.
Far from hindering performance, LIFE 360 is providing investors with confidence of the company’s long-term strategic focus. Despite a year of economic turbulence in 2022, LMVH posted record profits of €21 billion in 2022.
L’Oréal operates in a global beauty and cosmetics industry responsible for 120 billion plastic packaging products every year.
‘L’Oréal for the Future’ was the company’s response. This sustainability strategy stands out in terms of thoroughness and ambition. The strategy was formed in consultation with seven internal expert panels and set a range of targets with a 2025 deadline.
One example is a target of carbon neutrality across all production sites by 2025. The firm is on track, having already had 110 carbon-neutral sites, including 22 of its factories.
But the group is not just focused on the present but has also made efforts to address the historical impact on nature. Through the €50 million impact investment fund, the ‘Fund for Nature Regeneration’, they have committed to at least 15 million metric tonnes of CO2 capture by 2030.
Becoming a leader in sustainability has required significant financial support. L’Oréal has outpaced industry rivals in R&D spend. Now it sits at the cutting edge of innovative climate technologies such as agronomy, biotechnology, and biofermentation solutions.
And this allowed top-line growth that also outpaces rivals. company growth is also outpacing rivals. investment is already seeing early benefits. A strong 14 percent increase in revenues announced in early 2023 shows the benefits of such a progressive mentality.
Metsä Group (Finland)
The global paper industry is responsible for 2 percent of the world’s emissions and results in approximately 14 percent of total deforested land area.
Finnish paper manufacturer Metsä Group is leading the path in demonstrating that a less destructive alternative exists for paper companies.
Firstly, Metsä has made strides in reducing its on-site footprint. Ownership of a host of on-site renewable generation plants allows the company to power 90 percent of its operations through clean power. Ninety-nine percent of water consumed is purified and returned to waterways, promoting resource circularity.
Secondly, Metsä takes its role as a guardian of the forests seriously. The firm plants an average of four seedlings for every tree felled for its products. Development of a detailed certification scheme means it can trace and verify the sustainability of nearly ninety percent of all wood used (versus a global average of 10 percent).
Metsä is unique in its corporate set-up, with its parent company structured as a cooperative owned by more than 90,000 Finnish forest owners. This promotes a culture of collaboration and common interest in the nation’s natural ecosystem. This has allowed the Group to implement large-scale conservation efforts, such as the retention of decaying trees to promote biodiversity.
This sustainable approach has paid off. Energy self-sufficiency through Metsä’s self-owned biomass plants allowed them to continue operating during the energy crisis when competitors saw output decline. Operating income rose 29 percent last year.
There is no substitute for businesses doing the right thing for the sake of doing the right thing.
That said, all three cases show that transitioning towards more sustainable operations can also lead to competitive advantage. Not only does it convince investors of a clearly defined long-term strategy, but it also meets the demands of an increasingly socially conscious consumer base.
This should act as a source of motivation for companies – even in sectors such as the ones listed above with high potential for ecological devastation – that a path to lower emissions is not just possible in theory, but in practice.
As a start, it would help firms stop associating ‘overshoot’ with exceeding revenue forecasts.
Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
About the author
Matt Hattam is a Senior Associate Consultant at global strategy management consultancy Bain and Company. Matt advises international corporations and private equity firms in tackling various sustainability challenges and implementing decarbonization initiatives. In his former role as a management consultant at Baringa Partners, he was a host of the Energy Innovators Podcast.