New Bottom Line Volume 6.6 – Strategic Sustainability (2): It's in the way that you move it

March 12, 1997

Regular readers of NBL will know that I often challenge companies to think about ecological repositioning–to deeply ask the question “what business are we really in?” in light of the inescapable constraints of physical reality.

In recent weeks I’ve been writing about what I call “Strategic Sustainability” — a dramatic management approach that shifts environment from operational function to core strategic driver of everything from business strategy to product design.

But what of transport? Aye, there’s a challenge. Many analysts have called the automobile one of the most destructive ecological forces of the modern age: energy use and pollution; land lost to paved areas, with impact on runoff and urban flooding as well as primary productivity; the self-accelerating process of enabling and demanding sprawl. Along with our dependence on motor transport comes strategic vulnerability — to fuel cost and availability, regulation, competition, sheer congestion and public health impacts.

There is no shortage of proposed alternatives, from hybrid cars to mass transit, each with its proponents and detractors, experts and data, lobbyists and endless debate. But what to do if you have actual bottom line responsibility for a company whose economic viability depends on moving more stuff more miles around the surface of the planet in more motor vehicles? Or seems to? What do you do today to ensure profitability, and to position your company to ride out the coming waves of change?

Consider, for example, ASG– a $1.6 billion Scandinavian trucking/shipping/transport company. In ASG’s traditional business model, like that of most transport-related companies, more was better–move more cargo over greater distances and make more money. Its key performance metrics, for example, were tonnes of payload shipped and kilometers traveled by its fleet of trucks, ships and aircraft.

As ASG management increasingly understood future ecological, geopolitical and business constraints, it recognized that this focus left the company dependent on increasing fossil fuel consumption, vulnerable to price and supply changes, urban congestion, and the rest. And because metrics often shape performance by shaping management attention ASG found itself with an intrinsic disincentive to the kind of adaptability it knew it needed.

And it responded most creatively. In a sea change repositioning ASG decided that its core competence is not so much moving stuff around efficiently as it is ensuring that people have access to the stuff they need when they need it–which could mean both less transportation, and a way to profit from it. The company has even changed its name from ASG Transport to ASG Transport and Logistics to reflect this shift, and articulates its mission as follows: “We develop, market and produce efficient transport and logistics services that create competitive advantages for our customers.” ASG now tracks new performance metrics like revenue per litre of fuel burned or per vehicle-km traveled–shifting its metric from gross quantity to value-ratio–and plans a future name change to ASG Logistics.

ASG is leveraging sustainability to increasingly become a “knowledge company”. They are rapidly expanding their logistics business, providing tailored services and consultation to customers on everything from reverse logistics to product and packaging design for transport. ASG is helping their manufacturing customers reduce environmental impact, improve product manufacturing and distribution times, reduce costs, and improve quality. For example, ASG software helps customers analyze life cycle environmental impact of various transportation logistics scenarios – and benchmark their performance on energy, quality, cost, and environmental impact with respect to transportation and logistics.

ASG’s new logistics services are also helping their customers rethink their own businesses. For example, ASG helped one automaker reduce its European warehouses from three to one and their logistics costs by 30% through use of assembly-in-transit. It is even exploring a collaborative role in city planning, with a goal in one project of decreasing the number of deliveries by 40% without decreasing the goods volume begin delivered.

In addition, ASG passes on customer environmental demands to vehicle manufacturers. Several of these companies’ competitive strategy is to exceed legislative requirements, and then influence governments to strengthen regulations and to force competitors to comply.

The experiment seems to be paying off. ASG has won exclusive contracts with several major clients based largely on environmental performance. And by focusing on core competency, emphasizing value over quantity, and supporting their customers’ life cycle efficiency, ASG has created new business, that although currently a small proportion of their overall business, is the fastest growing (30% /year) in the company.

So next time you hear someone say “we can’t afford to think about sustainability,” remember ASG, and the emerging trend toward making a commitment to sustainability a strategic business asset.

[Thanks to Russell Barton and EKOS International for their contributions to this NBL.]

(c) 1997 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

May be posted intact–including this notice–in any non-commercial forum.
Please inquire at “reprint_rights at natlogic dot com” before reproduction in any commercial forum.