Aligning mission, vision and strategy for sustainable commercial buildings

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This article explains how organisations in the property and construction sector can take a strategic approach to sustainability as a means to enhance competitive advantage, add value, and contribute to the procurement and operation of sustainable commercial buildings.

Summary

This article explains how organisations in the property and construction sector can take a strategic approach to sustainability as a means to enhance competitive advantage, add value, and contribute to the procurement and operation of sustainable commercial buildings. It demonstrates the relationship between corporate social responsibility and sustainability, and describes the importance of aligning the company's mission, value, philosophy and strategy. The basic steps of strategic planning are described, showing how a company can integrate a sustainability philosophy throughout all aspects of its activities and operations. The article illustrates how a strategic plan can be effectively implemented, and examines the important steps of monitoring, measuring and sustainability reporting. Tools for use in strategic planning are introduced and briefly described.

Definitions

• A strategic approach to sustainable buildings
• Strategy
• Strategic planning
• Mission
• Vision
• Values
• Corporate social responsibility (CSR
• Competitive advantage
• A strategic approach to sustainable buildings
  • Lower costs
  • Differentiating your company

The rapidly evolving field of sustainable building creates some significant opportunities for participants in the building sector. Taking advantage of those opportunities, however, will involve equally significant challenges - this isn't just business as usual.

A sustainable commercial building is not simply an ordinary building painted with greenwash. From its inception, every aspect of the building will be closely studied, analysed and critiqued by interested groups and individuals. The nature of sustainable buildings will undoubtedly continue to change over time. A few years ago, use of recycled materials was a major attribute; now growing awareness of global warming and the increasing severity of drought conditions has focused increased attention on energy and water efficiency. Changes will continue as new technologies are developed and new environmental and social concerns gain greater attention. Active ongoing participation in the field will require continuous attention to new trends in technology and social and environmental issues of public and scientific concern.

For a company to be a successful participant in any aspect of the sustainable building field (whether that involves design, construction, management or occupancy), it will need to take a strategic approach to its organisation, management, planning and activities so that it gains - and sustains - competitive advantage. While every organisation will differ in the strategies that it uses to achieve a goal of successful participation in the field of sustainable building, there are some common elements that are worth considering.

Strategy

In simplest terms, a strategy is a long-term action plan for achieving a goal. Strategies and action plans are discussed in the Set objectives and develop action plans section of this article.

Strategic planning

Strategic planning involves identifying company goals (such as designing, building or owning state-of-the art sustainable buildings) and developing a systematic approach to achieving those goals.

Some of the aims of strategic planning are to:

• focus attention on significant issues and direct resources where they can provide the greatest benefit
• anticipate and plan for changing business environments
• examine the organisation's strengths, weaknesses, opportunities and threats and to develop strategies for dealing with them
• minimise ad hoc decision making, by planning for the longer term
• develop strategies for achieving company objectives
• ensure that all aspects of the company's activities are consistent with the company's objectives
• remain conscious of the needs of shareholders and other relevant stakeholders.

Strategic planning is a 'disciplined effort to produce fundamental decisions and actions that shape and guide what an organisation is, what it does, and why it does it' (Bryson, 2004, p.6). The focus is on the future. This definition makes it clear that there are three key aspects of strategic planning. These aspects are:

• analysing the organisation itself, including its purpose, aspirations, strengths and weaknesses
• identifying the framework, rationale and motivations for action, including the context within which actions will be taken
• determining the actions to be taken to achieve the identified goals.

Your plan should build on your existing systems, policies, structures and networks. It is not necessary, or productive, to totally re-invent your organisation to build sustainability into the way that you work.

A strategic plan is dynamic, so it may need adjustment as the plan is put into action. Outcomes need to be monitored and evaluated, and the plan should be adjusted and modified as necessary. This aspect of strategic planning is discussed in more detail in the Monitoring, measuring, reporting and improving section of this article.

The philosophical framework for a strategic plan is provided by a company's definition of its mission, vision and values.

Mission

A mission statement describes the purpose or role of the company or organisation; it tells why the organisation exists. Some examples are provided below.

Vision

A vision statement expresses the aspirations of a company. It tells what the company would like to be in the future.

Investa (IPG), an Australian diversified property company, has the following vision: 'To become the most respected real estate company in Australia' (Investa, 2007).

The terms vision and mission are often confused, so some companies have mission statements that actually express their vision for the future, rather than their current role and purpose. There is value in identifying the current situation in a mission statement before looking ahead to the future of the company in the vision statement.

Values

Company values, or a company philosophy, have a significant effect on how a company is run, as they are designed to reflect and to shape the company's culture (for more information about company culture, see Culture change for sustainable commercial buildings). A company philosophy is based on the beliefs, values, attitudes, and unwritten guidelines that ultimately determine how the company operates and how its people make decisions. Many companies articulate their company values or philosophy on their website or in corporate reports. For example, Leighton Contractors' values are stated as:

• Safety and health above all else
• Our people are the foundation of our success
• Respect for the community and environment
• Enduring business relationships
• Achievement through teamwork (Leighton Contractors, 2007).

These values are accompanied by a set of 'guiding behaviours' that explain the particular behaviours that will support the achievement of each value.

Corporate social responsibility (CSR)

Corporate social responsibility, which refers to a company's effort to move towards sustainability, is increasingly becoming a philosophy and strategy adopted by leading companies, including those in the sustainable building sector. 'Corporate social responsibility' and 'sustainability' are sometimes used interchangeably in a corporate context; however, the former is more correctly a strategy and the latter a goal for society, the environment, and for the companies themselves.

The International Organization for Standardization (ISO, 2007) provides the following definition of social responsibility:

'The responsibility of an organisation for the impacts of its decisions and activities (including products and services) on society and the environment, through transparent and ethical behaviour that:

• is consistent with sustainable development and the welfare of society
• takes into account the expectations of stakeholders
• is in compliance with applicable law and consistent with international norms of behaviour
• is integrated throughout the organisation.'

Social responsibility is similar to, though broader than, triple bottom line reporting, and includes such issues as:

• environmental protection
• human rights
• organisational governance
• labour practices
• consumer issues
• fair operating practices
• contributions to the community and society.

Companies are increasingly aware that their own sustainability depends on their ability to manage these and other issues (see snapshot case study on The GPT Group and corporate social responsibility below).

Corporate social responsibility can provide a useful strategic framework for strategic planning.

Competitive advantage

An important element of strategic planning is the identification of a company's competitive advantage - the aspects of a company that differentiate it from its competitors. The competitive advantage may derive from tangible assets (tradeable things like buildings, plant and cash) or intangible ones (such as the strategies, skills, knowledge, resources or competencies of the organisation, as well as its philosophy, values or approach to its business). Sustainability is one such approach that can contribute to competitive advantage.

In his 2003 report, Corporate sustainability - an investor perspective, Shaun Mays, who was then an executive of Westpac, stated that: 'Sustainability and the management of sustainability issues are increasingly acknowledged as a way of identifying and building competitive advantage' (DEH, 2003).

Two ways of gaining a competitive advantage are to have lower costs for a given quality, and to differentiate your company from its competitors in the market (Porter, 1989). An effective strategy built around a framework of sustainability and focused on sustainable buildings can actually help to gain a competitive advantage based on both lower costs and differentiation.

Lower costs

The single most important competitive opportunity for most companies arising from sustainable commercial buildings is likely to be increased profit resulting from either lower costs or enhanced value. Lower costs are achieved by pollution and waste reduction, energy and water conservation, and materials re-use; savings can be made from relatively easily made changes to resource use. There are, however, some issues with the disassociation of costs and benefits: for example, the developer may pay for initiatives that save ongoing costs, but, in a net lease situation, the benefits will accrue to the occupants, as they pay for the outgoings.

Other cost advantages may arise from skills within your company for efficiently carrying out the role your company plays with respect to sustainable buildings, as well as from your relationships with the suppliers of the products used in your sustainable buildings, and from your experience in applying new sustainability-related technologies and processes. All these factors can help to keep your costs lower than those of competitors who lack effective strategies for participation in the industry.

However, and despite the attractiveness of increased profits through lower costs, it is difficult to sustain competitive advantage based on a low-cost strategy, and so firms are seeking other sources of differentiation.

Differentiating your company

Differentiating yourself from your competitors is likely to be an even more important factor than costs in gaining a competitive advantage in the sustainable building sector, particularly over the next few years.

Part of the attraction of occupying or investing in a sustainable building at present is the association of the tenant or investor with the issue of sustainability. This connection is intended to demonstrate that the investing or occupying organisation cares about sustainability, and that sustainability is one of the values underlying the organisation. The building itself can therefore contribute to differentiating the organisation from its competitors.

An organisation in the sustainable building sector is much more likely to be able to demonstrate its credibility in the field if it has a coherent strategy based around sustainability.

Competitive advantage in the sustainable building sector involves much more than perception, as important as that is. A competitive advantage relies on the ability to outperform your competitors. For a designer, that means producing designs for buildings that can achieve high ratings on systems that rate aspects of sustainability. For builders and developers, it means producing buildings that perform well; it also means being able to construct those buildings in an efficient and timely way and at costs that are attractive to tenants. The specific factors that influence competitive advantage differ for the types of companies involved in the sector, but they all require a company to focus on the types of things that it does well.

The importance of aligning corporate mission, vision and strategy for sustainability

For a company strategy to be effective in positioning you to obtain a competitive advantage, the strategy has to permeate all parts of the organisation. It is not enough to just have the skills to build good buildings. A corporate social responsibility or sustainability strategy has implications for all aspects of the way the company is run and does business. It needs to be integrated into systems, policies, processes and decision-making behaviours. It affects the labour practices of the company, its purchasing practices and the way it deals with suppliers, its attitudes and practices related to the communities where it operates, its relationship with government, and many other activities.

Consequently, to be credible in the marketplace and to obtain a competitive advantage, a company has to integrate sustainability into all its activities, even those that may seem remote from the actual provision of sustainable buildings. To do this effectively requires an alignment of mission, vision and values, so that there is unambiguous direction for the actions, culture, and behaviours on which the realisation of your company's strategies depends.

The figure above illustrates the way in which Leighton Contractors envisages how its core purpose (mission) and values will align, through actions and behaviours, to achieve its vision of sustainability.

Identifying priority areas for action

Alignment of your company's strategic framework - your mission, vision and values - can help you to identify priority areas for earliest attention, and to avoid fragmenting efforts on too many areas at once, thus failing to make essential progress where it is needed. It can also be important in calling attention to areas of the business that may pose potential risks to the achievement or maintenance of competitive advantage.

One such area is supply chain management. As some companies, such as Nike, have learned to their detriment in the marketplace, buyers regard your suppliers as part of your operations. If you integrate supply chain management into a strategy framework based on sustainability, you may end up discovering that one of your suppliers has an unacceptable human rights record, or that you are sourcing timber from areas in which forestry practices are creating unacceptable environmental and/or social impacts (see snapshot case study on Simmonds Lumber and sustainable supply chain practices).

Similarly, particularly in an expanding and changing area like sustainable buildings, people with outstanding skills and experience will be in high demand. Therefore, it is important to ensure that your strategy pays attention to staff issues and recognises the heightened social and environmental agenda of young people. Aligning your mission and your strategy around sustainability will help to identify the critical skills for obtaining and maintaining the labour practices, company values, and operating conditions that will prove attractive to individuals with those essential skills.

Policies, regulations and standards

There are no policies or regulations that govern the way a company must carry out its strategic planning. However, there are policies, regulations and standards at both government and company levels that influence the content of strategic plans.

Governments at all levels in Australia commonly have policies on sustainability (or sustainable development or ecologically sustainable development) and social responsibility, and on the governance or on specific aspects of these concepts, such as sustainable purchasing and environmental management. Many companies and organisations possess similar policies.

Some companies in Australia are already required to publicly report on a regular basis about certain aspects of their performance related to sustainability.

The Corporations Act 2001 requires all companies that are required to prepare financial statements to disclose details of their performance in relation to any significant Commonwealth, state or territory environmental regulation that applies to the company's operations.

Other sections of the Act require providers of investment products to disclose the extent to which labour standards or environmental, social or ethical considerations are taken into account in investment decision making.

In addition, some Commonwealth Government programs, such as eco-efficiency agreements and energy efficiency opportunities, require public reporting.

Many government agencies and some private companies require companies that tender for construction jobs to be certified for ISO 9000 (Quality) or ISO 14001 (Environmental Management), or both. The International Organization for Standardization is currently developing a standard for social responsibility, and although this standard will not be certifiable like ISO 9000 and ISO 14001, it is likely to become an important criterion for company performance in the future.

There have been a number of inquiries in recent years that have looked at the need for expanding policies or regulation concerning aspects of corporate social responsibility. These include the Australian Government's Corporations and Markets Advisory Committee's (CAMAC) examination of whether and how stakeholder interests and corporate social responsibility should be regulated; and the inquiry, by the federal Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS), into corporate social responsibility and triple bottom line reporting.

A wide range of regulations already in place affect those aspects of company performance that have sustainability implications. There are widespread expectations that regulation of aspects of sustainability or social responsibility will increase in the future, including greater requirements for transparency and reporting.

Strategic plans need to take account of current and likely future requirements that bear on the company's operations. Changing regulatory and policy frameworks reinforce the need for sound strategic planning. Use of a well-developed strategic plan can help a company to anticipate and adjust to changes in regulations and policy, thereby reducing the company's risk of future surprises.

Planning for improved performance - developing a strategic plan

• Prepare for planning
• Develop a shared view of who you are and who you want to be
• Analyse the organisation and its environment
• Identify a strategic approach and goals
• Set objectives and develop action plans
• Produce a final strategic plan

In preparing for the task of developing a strategic plan, it is important to bear in mind that long-range planning and strategic planning are not the same. A long-range plan is designed to achieve a goal or set of goals over a period of several years. It assumes that current knowledge is sufficiently reliable to allow a firm plan to be developed. A strategic plan, on the other hand, is designed to allow an organisation to succeed in a dynamic, hard-to-predict future environment. The emphasis is on overall direction rather than specific, year-by-year, concrete objectives. Its focus is on applying strategic thinking to the task of achieving the organisation's purpose or mission.

A strategic plan does not, however, sit apart from the rest of your organisation, so the process of developing one should also build in cross-checks to ensure that it is aligned with a commitment and systematic approach to sustainability throughout your business.

As the environment for sustainable buildings in Australia is clearly in a state of change, companies in the sector can derive considerably more value from developing responsive strategic plans than from fixed long-range plans.

There are several stages to developing a strategic plan:

• Prepare for planning
• Develop a shared view of who you are and who you want to be, including preparation of a mission statement, vision statement, and a statement of the core values of the company
• Analyse the organisation and its environment
• Identify a strategic approach and goals
• Set objectives and develop action plans
• Produce a final strategic plan

Prepare for planning

It is essential to obtain senior management commitment to the strategic planning process and the resulting plan. To be meaningful, a plan must reflect the vision of the organisation and be accepted as the approach to be used by the organisation. Neither of these can be ensured without senior management commitment to the process and its outcome.

Once senior management commitment has been obtained, you should determine the process to be used for planning, including the resources available, the time to be allocated, the schedule, points at which input will be sought, how the input will be handled and feedback provided, and any other relevant issues or constraints to the process.

Next, you need to identify the individuals to be involved in the strategic planning process. Although input should be gathered from a range of people both inside and outside the organisation, the process of preparing a strategic plan should be undertaken by a small core of individuals who are respected throughout the organisation.

Once the strategic planning team has been assembled, you can prepare a preliminary list of the information that will be needed for the development of the plan and the sources from which that information may be obtained. Additional items can be added to this list as the process proceeds, but it will be useful to have the necessary information at hand when specific issues arise during the planning process.

Develop a shared view of who you are and who you want to be

A strategic plan is a plan specifically developed for your organisation. At the outset, therefore, it is essential to define the purpose and role of the organisation, the values that drive it, and the future it is aiming to achieve.

A mission statement should tell why the organisation exists and what it does (e.g. managing commercial buildings). It usually defines the main activity or method that the organisation uses to carry out its purpose. It should be one of the first elements of a strategic plan prepared, because it should shape the contents of the plan. If your organisation already has a mission statement, you should review it to determine whether it still expresses the purpose of the organisation. If not, the statement should be revised so that it reflects current thinking (for some examples of mission statements, see the Mission section of this article).

Once the mission statement is finalised, you can articulate your organisation's vision: What does the company aspire to be? What would constitute success for the organisation? How will the company contribute to sustainability?

Next, you need to identify the core values of your company. These are the principles or beliefs that guide the organisation as it pursues its purpose. For many organisations, values have traditionally been expressed in terms of aspects of ethical behaviour, such as integrity, transparency and respect, or in terms of good performance, such as customer service, innovation and excellence. A growing number of companies are adopting corporate social responsibility and/or sustainability as a core value and are using it as the basis for their strategic planning (see the two snapshot case studies on IAG and sustainability and Leighton Holdings and core values above below).

The value of adopting sustainability as a framework for a company's strategic planning is described in the Importance of aligning corporate mission, vision and strategy for sustainability section of this article.

Analyse the organisation and its environment

Once you have determined the purpose and aspirations of your company and identified the principles by which it operates, you need to undertake a detailed analysis of both your company and the marketplace in which it operates.

An analysis of your internal strengths and weaknesses, as well as external opportunities and threats (SWOT analysis) is a good starting place, as it is a familiar technique to many and is easily learned by others. Other tools for analysis can also be used, such as Porter's analysis of five forces of competition, or PEST, which is an analysis of political (and legal), economic, socio-cultural and technological forces. A description of these strategic management tools is provided in the Tools section of this article.

There is value in analysing each of the key products, services or divisions of the company, as well as the overall organisation.

Some of the topics that may be useful to cover in these analyses are:

• the nature of the sustainable building industry
• critical sustainability issues and challenges facing the company now and in the future (limit the number of issues, so that the analysis is manageable)
• the identity and perspectives of key stakeholders (informed by interviews with stakeholder groups)
• current and likely future policies and legal requirements affecting the organisation
• opportunities for shared value - activities that benefit both the company and society, where the company can make a real difference.

It is important to keep in mind that the purpose of the analysis is to assist the organisation in successfully responding to future changes in the environment. Your focus should be less on what the future changes are likely to be than on how the company can prepare itself to be able to respond successfully, regardless of what situations arise in the future.

An essential subject for analysis is the degree of 'fit' of each part of the company's business with its mission, vision and principles. There may be activities in which the company does not currently have, or is likely to gain, a competitive advantage.

Some activities may actually impede the company in gaining a competitive advantage in other areas. For example, a company aiming to position itself as a developer of sustainable buildings may lack credibility if it is also undertaking projects that are seen as potential sources of significant environmental degradation.

Identify a strategic approach and goals

When you have defined your company's mission, vision and values, and identified the critical issues and factors affecting the company, you can move on to the process of detailing the strategies you want to use and the goals you want to achieve. Your work so far has probably already led to discussion of the broad strategic approach that seems most likely to provide your company with a competitive advantage.

At this stage in your planning, you will want to confirm and agree upon the strategic approach that creates the best match between your company's mission, vision and values, the strengths and weaknesses of your organisation, and the nature of the marketplace in which you operate. The generic strategies of low cost and differentiation will need to be tailored to your particular circumstances. You will also probably want to elaborate on some specific aspects of your strategic approach. The use of sustainability as a framework for your strategic planning can assist in focusing attention on appropriate approaches.

Goals are statements of outcomes that your company will use to guide its activities and management functions. The overall goal of the company is expressed in its mission statement. Goals for specific areas of activity must be aligned with the mission statement goal. If your specific goals are not compatible with the company's overarching goal, then the company will be going off in several directions at once. This is non-productive, makes it difficult to have credibility, and severely restricts your ability to gain a competitive advantage.

If some of your goals seem appropriate, but do not align with your mission statement, then you may need to re-visit some aspects of your mission statement, or determine whether certain areas of activity are inappropriate for your organisation. Again, use of sustainability as a framework for your overall strategic planning can help you to ensure this alignment.

You will probably want to set goals for each division or program area of your company, as well as for core management functions.

Set objectives and develop action plans

Objectives quantify what you want to accomplish. They are the link between planning and action. Many strategic planners emphasise the need for objectives to be SMART; that is, they should be:

• specific
• measurable
• achievable
• realistic
• time-based.

Objectives detail the specific activities you will undertake. For a company preparing to own or occupy a sustainable building, these activities might include actions to ensure that the maintenance of the building reinforces the sustainability features built into it. Other activities might deal with ways in which the organisation is going to make every aspect of its business socially responsible, such as looking closely at its policies on life-work balance or its purchasing policies. Some objectives may address the need to establish fruitful partnerships with other companies to supply needed capabilities for the provision of sustainable buildings.

Responsibilities need to be allocated for achieving each objective. After you have set your objectives, you will want to develop action plans for achieving those objectives. An action plan spells out what you intend to do and is the basis for implementing your strategic plan.

Every action plan should specify the indicators you will use to measure progress towards your objective and the mechanisms you will use to monitor that progress. You will need to consider what type of reporting your organisation wants to undertake, and how frequently it will plan to report. The nature of the reporting will have an impact on the frequency and nature of your monitoring. Details on monitoring, measuring and reporting are discussed in the Monitoring, measuring, reporting and improving section of this article.

Produce a final strategic plan

The actual writing of the strategic plan can only effectively be done by one person or a very small number of people.

Once a draft plan has been prepared, it should be submitted to the Board of Directors and top management for their review and approval.

A plan may be prepared in two parts: one part suitable for general distribution, including outside the company; and a second part containing more detailed information that will change relatively often, as well as relatively confidential information.

A typical format of a strategic plan is as follows:

• Executive summary
• Mission, vision and values statements
• Goals and strategies
• Appendices
  • Objectives
  • Action plans
  • Description of strategic planning process
  • Strategic analysis data
  • Goals for Board and Chief Executive Officer
  • Budget planning
  • Operating plan for coming year
  • Financial reports
  • Communication of plan
  • Review and evaluation schedule

Implementing and operating for improved performance

• Creating ownership and commitment
• Planning for implementation
• Promoting the strategic plan

Although a company can derive great value from the process of strategic planning, it can multiply that value if it actually implements the plan. Surprisingly, perhaps, a number of surveys of executives have found that the majority of strategic plans are not implemented (McKinsey, 2006; Johnson, 2004).

The first important steps towards ensuring that your plan is implemented must be taken during the strategic planning process itself.

Creating ownership and commitment

Top management commitment is essential to ensure that the plan is taken seriously throughout the organisation. The plan must also represent the vision of the organisation, which requires active top management involvement. Management must also exercise leadership to ensure that a sustainability approach is integrated throughout the organisation.

Although a strategic plan can only be prepared by a small group of people, active steps must be taken to ensure that other staff have the ability to provide input and to review draft versions of the plan. These steps are needed to create ownership of the plan by the whole organisation.

Because a sustainability approach may involve significant changes in the operating practices of an organisation, awareness and education programs should be provided for all levels of employees.

Planning for implementation

The strategic plan should identify realistic objectives for all levels of the organisation. Sustainability requires commitment throughout the organisation, so objectives should be set for the overall organisation, for the various divisions or sections of the organisation, and for specific positions in the organisation. All of the objectives in the plan should follow the SMART principles.

Responsibility should be allocated to specific individuals for each of the objectives. If actions required to achieve each of the objectives are not specifically assigned, they are unlikely to be implemented. Time lines and milestones associated with each of the objectives should be achievable. Unrealistically ambitious time lines are likely to discourage staff and lead to unwillingness to devote time and effort to implementation.

It is important to set priorities among the objectives to be achieved. Not everything can be done at once. Initiation and deadlines should be staggered so that staff can devote adequate attention to the individual actions for which they are responsible.

It is important to ensure that a clear program for monitoring, measurement and reporting is built into the plan, so that progress can be measured, changes can be made when necessary, and the organisation gains the benefits of its achievements.

Promoting the strategic plan

The adoption of the strategic plan should be celebrated throughout the organisation. It should be used as an opportunity for communicating the commitment of the organisation to sustainability and for acquainting all staff with the plan's contents.

Provision of adequate resources for implementation is essential for the plan to be successfully implemented. If resources are insufficient, only a limited number of objectives can be given priority and the time for implementation may be spread over an extended period. Attempting to undertake implementation with inadequate resources is likely to have an extremely negative effect on staff morale, and to raise serious questions about the organisation's commitment to its plan.

Once the strategic plan has been adopted and disseminated, opportunities should be provided for building staff awareness and understanding of sustainability issues. Greater understanding is likely to create interest in active implementation.

Monitoring, measuring, reporting and improving

• Monitoring
• Measuring
• Reporting
  • Purpose and value of sustainability reporting
  • Guidelines for sustainability reporting
• Improving

A strategic plan is a valuable tool for companies to develop a business approach based on sustainability and to set the directions they want to follow to obtain a competitive advantage. However, any plan is only as effective as its implementation. Monitoring and measuring progress on specific objectives is critical to ensuring that the implementation of your plan follows through on the intended directions. Sustainability reporting provides a way to demonstrate your commitment to sustainability, highlight your achievements, and differentiate your company from its competitors.

Monitoring

A strategic plan is intended to be a document that is continuously used by your organisation to guide its activities. Detailed ongoing monitoring of progress is essential to ensure that the company is in fact following the strategic direction developed in the plan. The more effective your monitoring program is, the more likely it is to provide the company with early indications that activities are moving off course.

Although some aspects of your plan, such as your mission, vision and values, will generally remain constant for some time, the objectives and action plans cover defined periods, often only a year or two. The frequency at which a strategic plan is modified will depend on the specific nature of the company and its place in the marketplace.

Shorter term objectives need to be monitored and adjusted as necessary. 'Better monitoring is better management,' and 'You can't manage what you can't or aren't monitoring' are common sentiments of good managers. Monitoring tells you what is happening at a specific time, and lets you know whether conditions are improving or getting worse. Without that information, you can only guess at whether the actions being taken are productive and cost-effective.

Every objective in your strategic plan should follow the SMART principles. Reliable systems should be put into place for monitoring progress on these objectives.

It is important to periodically ensure that the monitoring of performance on actions to implement the plan is working effectively and efficiently. If necessary, you should make adjustments to the monitoring and measurement program so that you have an accurate picture of progress on the implementation of the plan.

Measuring

'You can't improve what you can't measure' is one of the maxims of management. One aspect of a strategic planning process involves the identification of appropriate indicators (metrics) to show how the company is performing with respect to a particular objective. The metrics developed should reflect the priorities of the strategic plan. Measurement against the key performance indicators provides a snapshot of performance at a given time. It is intended to provide insight into current progress, as well as to identify changes required to meet strategic planning objectives. Measurement is also used to track expenditure and use of resources.

A number of techniques are available to assist decision makers with effectively using monitoring and measuring results in their businesses. The balanced scorecard (Kaplan & Norton, 1996) is one of the most popular methods. It is intended to help transform a company's mission statement and strategy into specific quantifiable goals, and to monitor the company's performance in terms of achieving those goals. It is used to examine the results obtained for the indicators related to various aspects of a company's activities, as well as the factors that influence the level of performance against these indicators.

Typical areas covered by the balanced scorecard approach include customers, financials, internal processes, and organisational learning and improvement. A balanced scorecard is not a strategic planning tool; rather, its role is in performance management. It can, however, provide a focus on strategic issues and on managing the implementation of strategies. Software is available for using the balanced scorecard method.

Additional business management tools are described in the Tools section of this article.

Reporting

Purpose and value of sustainability reporting

Sustainability reporting is becoming one of the basic criteria for judging the social responsibility of organisations. It helps differentiate companies with a commitment to sustainability from their competitors, meets community demands for greater transparency and disclosure, and is considered to enhance a company's reputation. In addition to its public function, comprehensive reporting helps to support company strategy. It provides the ability to benchmark performance, operational and management improvements and better management of risks. Some companies are now requiring their suppliers to produce sustainability reports.

Companies that regularly undertake this form of self-analysis, and who closely monitor their operations, will definitely reduce their risk of encountering unexpected events and crises. They will be able to meet and respond to pressures along the supply chain.

Sustainability reporting is the public face of the social responsibility of an organisation.

The Global Reporting Initiative, the most widely used framework for guiding the contents of sustainability reports, defines the purpose of sustainability reporting as the practice of measuring, disclosing and being accountable for organisational performance towards the goal of sustainable development. It includes accounting for economic, environmental and social impacts. It is similar to, but broader, than triple bottom line reporting.

Some companies in Australia are already required to publicly report on particular aspects of their performance related to sustainability.

The Corporations Act 2001 requires all companies that are required to prepare financial statements to disclose details of their performance in relation to any significant Commonwealth, state or territory environmental regulation that applies to the company's operations.

Other sections of the Act require providers of investment products to disclose the extent to which labour standards or environmental, social or ethical considerations are taken into account in investment decision making.

In addition, some Commonwealth Government programs, such as eco-efficiency agreements and energy efficiency opportunities, require public reporting.

Guidelines for sustainability reporting

As most sustainability reporting is voluntary in Australia, there are no binding rules for the contents of the reports. However, there are a number of different guidelines and frameworks that have been issued by government, industry groups and others.

The most widely used guidelines are prepared by the Global Reporting Initiative (GRI), an international organisation. Many of the companies producing sustainability reports in Australia say that they take the GRI guidelines into account when preparing their reports, but the extent to which they comply with the guidelines varies considerably.

The GRI guidelines spell out the recommended contents of a sustainability report. They also identify various levels for reporting, depending on the experience and size of the organisation.

Verification of sustainability reports by independent third parties is increasingly viewed as important in sustainability reporting.

Improving

A strategic plan should be a living document. By keeping a careful eye on the implementation of actions to achieve objectives, you can identify elements of your plan that may need adjustment or replacement. There are often many different ways to achieve a given objective. If you find that a technique isn't working, or is too difficult or time-consuming, you should adjust your program to provide a greater likelihood of success within the available time frame.

It is also important to acknowledge and encourage those involved in the implementation of the plan. There may be opportunities for providing incentives to encourage implementation.

You should evaluate your strategic plan at periodic intervals and determine whether it needs substantial change or re-working. Major revisions should generally not be done too often, but plans do go out of date, particularly if there are major changes in the organisation or its marketplace.

Tools

• Analysis of the organisation
  • SWOT analysis
  • PEST analysis
  • Porter's Five Forces model
  • Value chain model
• Performance management
  • Balanced scorecard
• Sustainability reporting
  • Global Reporting Initiative - G3 guidelines
  • AA1000

Analysis of the organisation

SWOT analysis

SWOT analysis is one of the most familiar tools for analysing an organisation, or parts of an organisation. SWOT is an acronym for strengths, weaknesses, opportunities and threats. Although software is available for SWOT analysis, it is very easy to apply without any software. To use a SWOT analysis, you simply need to draw a matrix like the one in the figure below.

You may want to sub-divide this matrix or use separate matrices for each division of the company, as well as one for the overall organisation. You can also prepare separate matrices for different aspects of the business, such as financing, innovation and stakeholder relations.
You may want to identify some categories for items to be included in the matrix. As an example, under strengths, some categories could be skills, management, location and partnerships.

For more information, see http://www.mindtools.com/pages/article/newTMC_05.htm.

PEST analysis

PEST is an acronym for political, economic, social and technological factors. PEST analysis has a different focus to SWOT analysis. Where SWOT is used to look at an organisation itself, PEST is applied to analysing the market, including competitors, in which an organisation operates. Both can make a useful contribution to the development of a strategic plan. PEST is generally considered to be most useful when applied before SWOT, so that the insights into the market can then be applied as part of the SWOT analysis.

Conducting a PEST analysis is similar to conducting a SWOT analysis. It uses a matrix like that for SWOT, with sections labelled as political, economic, social and technological. Some practitioners have expanded the PEST matrix to include other factors, such as ecological/ environmental, legislative/legal, demographic, ethical and industry analysis factors. Others consider that these factors are merely sub-categories of the original four factors and thus can be analysed in that way.

Porter's Five Forces model

Michael Porter (1998a), a professor at Harvard Business School, identified five forces that affect the competitiveness of a business. These are:

• existing competitive rivalry between suppliers
• threat of new market entrants
• bargaining power of buyers
• power of suppliers
• threat of substitute products (including technology change).

This model can be used as the basis of an analysis of market forces to make a strategic assessment of your organisation's competitive position. This can then feed into the development of your strategic plan.

Typically, the Five Forces model is shown as a series of five boxes in a cross formation, with the box labelled 'existing competitive rivalry' at the centre. A five forces analysis can be productively applied along with SWOT and PEST analyses.

Software is available to assist in applying the Five Forces model to develop a tailored picture of your organisation's competitive situation.

Value chain model

Value chain analysis is used to obtain an understanding of the activities that can assist in developing a competitive advantage. It is based on a model introduced by Michael Porter in his book Competitive advantage (Porter, 1998b). The value chain model separates activities into two types: primary and support activities.

Primary activities include:

• inbound logistics - activities concerned with receiving and storing externally sourced materials and distribution of the materials to the point of use as required
• operations - transforming inputs into finished products and services
• outbound logistics - activities associated with getting finished goods and services to buyers
• marketing and sales - identification of customer needs and the generation of sales
• service - support of customers after the products and services are sold.

Support activities include:

• the infrastructure of the firm
• human resource management
• technology development
• procurement.

The firm's margin or profit depends on its effectiveness in performing these activities efficiently. A company can gain a competitive advantage by reconfiguring the value chain to provide lower cost or better differentiation.

Differentiation stems from uniqueness. A differentiation advantage may be achieved either by changing individual value chain activities to increase uniqueness in the final product, or by reconfiguring the value chain. The inclusion of sustainable features in a commercial building is one way of obtaining a differentiation advantage.

Value chain analysis is a three-step process:

1. Activity analysis: Identify the activities you undertake to deliver your product or service
2. Value analysis: Determine what you could do to add the greatest value for your customer
3. Evaluation and planning: Evaluate whether it is worth making changes, and then plan for action.

Software is available to assist in applying the value chain model.

Performance management

Balanced scorecard

The balanced scorecard is a strategic approach and performance management system that helps managers at all levels to monitor results in their key areas. It is based on work by Kaplan and Norton (1996). The method uses measures from four perspectives to provide a picture of the organisation's performance. The perspectives are:

• financial perspective
• customer perspective
• internal business processes perspective
• learning and growth perspective.

The method analyses both current performance and the potential for the organisation to perform well in the future.

The Balanced Scorecard Institute promotes the use of the tool; extensive information is available on their website.

Sustainability reporting

Global Reporting Initiative - G3 guidelines

The most widely used guidelines for sustainability reporting are prepared by the Global Reporting Initiative (GRI). The GRI is attempting to promote transparency through international harmonisation in reporting relevant and credible corporate economic, environmental and social performance information, in order to enhance responsible decision making.

The GRI guidelines provide information on sustainability reporting, report verification, and related issues. They also identify various levels an organisation can adopt for reporting, depending on the experience and size of the organisation.

The GRI G3 guidelines were issued in October 2006, and require three types of information:

• Overall organisational context
• Management approaches to social, environmental and economic issues
• Performance related to social, environmental and economic indicators

The broad headings for environmental, social and economic impacts are listed below.

GRI environmental impact categories

• Materials
• Energy
• Water
• Biodiversity
• Emissions, effluents and waste
• Products and services
• Compliance
• Transport
• Expenditures on environmental protection

GRI key social impact categories
These issues are less familiar to many organisations than environment issues, although coverage is growing. GRI identifies four key areas of impact:

• Labour practices and decent work
• Human rights
• Impacts on society and communities
• Product responsibility

GRI economic impact categories

• Economic performance - covering direct economic impacts of the organisation's activities and the economic value added by these activities
• Market presence - information about interactions in specific markets
• Indirect economic impacts - economic impacts created as a result of the organisation's economic activities and transactions, such as the economic impacts of improving or deteriorating social or environmental conditions, enhancing skills and knowledge amongst a professional community or in a geographical region, jobs supported in the supply chain or distribution chain, and linkages between economic growth patterns and the use of particular products and services

AA1000

The most commonly applied guidelines for the verification of sustainability reports are the AA1000 guidelines produced by AccountAbility, a UK-based non-governmental organisation. Their website includes the guidelines, as well as other publications to assist in the use of the guidelines or to improve the quality of sustainability reporting and stakeholder engagement by organisations.

The AA1000 guidelines focus on three key aspects of reporting:

• Materiality
• Completeness
• Relevance
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