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2010 Conference: UPS’ Kurt Kuehn offers five reasons CFOs should care about sustainability
By Tim Wilson, Editor & Writer, Boston College Center
Kurt Kuehn, the chief financial officer of UPS, addressed the Boston College Center’s International Corporate Citizenship Conference this afternoon about sustainability. But first he assured his listeners that as a CFO, sustainability absolutely belongs on his radar screen.
“As issues like global recession, corporate bankruptcies and credit crises have take center stage, CFOs have come out from behind the scenes,” explained Kuehn. He said CFOs no longer worry only about quarterly results but also focus on strategies for long-term growth.
And he pointed out that in today’s business environment, long-term growth cannot be separated from issues of economic, social and environmental policies. In fact, he noted, a CFO’s job is about using resources wisely and ensuring a business is strong enough to thrive for decades. Or in other words, is sustainable.
Kuehn began his UPS career in 1977 as a delivery driver and has held positions in operations, industrial engineering, finance and marketing. He became UPS’ first vice president of investor relations in 1999 and later that year helped take UPS public — the largest IPO of the 20th century.
Kuehn told how going public in 1999 was a catalyst for UPS focusing on sustainability as it acquired a new set of stakeholders to deal with and the social and environmental components of corporate responsibility demanded more of the company’s attention. At the same time, there was recognition that transparency was not only a good thing to do but a necessity. “We realized there is a need to pull the curtain back and expose yourself to both praise and criticism.”
As requirements for transparency increased and reporting guidelines emerged, he said, it became apparent that much of the data UPS already gathered for operations met the demands of those interested in sustainability. It became obvious for UPS, Kuehn said, that sustainability wasn’t just a reputational effort. It went to the core of the way it operates as a business. At UPS, he said, they thought of it as “running the tightest ship in the shipping business.”
This efficiency focus raised awareness at UPS of its operations’ impact on the environment and brought measures that addressed both concerns. Engines in the UPS air fleet were made more efficient to reduce both emissions and noise. Kuehn noted that this was a “tough call financially” at the time but was a wise decision as fuel prices skyrocketed.
“So there’s no question,” he observed, “that lean is green, in terms of both the environment and dollars.” Kuehn asserted that today you can say sustainability is a “strategic imperative” for CFOs and that it is corporate citizenship practitioners’ job to bring CFOs into their circle.
With that in mind, Kuehn offered five reasons CFOs should care about sustainability.
- You can cut costs and enhance efficiency.
“If you’re able to connect cost savings and efficiencies to sustainability, you’re a heck of a lot more likely to get attention from senior leaders in your company,” he said. As an example, he told of the UPS Package Flow Technology initiative which shortened delivery routes while drastically cutting fuel use and carbon emissions. - You can mitigate risks.
As a corporate strategist, a CFO must assess long-term risks to the business and find ways to reduce those risks, Kuehn said. Looking through a sustainability lens, he explained, presents a new way of looking at forecasts and risks to anticipate “what ifs,” that can range from rising fuel prices, to changing shareholder preferences on environmental and social issues, and increasing regulations.
He said that sustainability is gaining traction with investors and that anticipating long-term risks in CSR-related areas does help. “The one thing Wall Street hates the most is surprises,” he remarked. - You can open up new competitive and revenue opportunities
“At UPS, we’ve taken what we’ve learned about more sustainable operations and started offering to share this body of information with our customers,” said Kuehn. That includes tools to help customers measure carbon emissions related to transportation and distribution of products, and advice on using environmentally responsible materials to right-size their packaging and to reduce shipping damages.
The fallout from the financial crisis has customers more skeptical than ever, Kuehn said. “They are looking for companies they can trust and companies that will be around for the long term.” Sustainable products and practices, he added, in addition to enhancing a company brand, can tip the balance in your favor with many consumers to offer a competitive advantage. - You can drive innovation.
Kuehn cited innovation in new products and services, manufacturing processes, facilities and construction, and supply-chain practices as just some of the benefits driven by sustainability. “It is creating a catalyst of new thinking in some companies” and serving as another form of research and development.
An intangible benefit of sustainability, Kuehn said, comes from the fact it matters to employees because it affects their families. Innovation manifests itself this way thanks to the passion of employees for sustainability and social responsibility, he said. Noting that “any good UPSer loves a problem,” Kuehn cited employee innovations that expedited launching of a carbon neutral shipping option and a tracking system for earthquake victims in Haiti where a UPS employee volunteered with the Salvation Army. “Those great aha innovations happen when you’ve got people who are inspired.” - You can improve employee recruiting, development and retention.
Kuehn observed that the current generation of employees wants an employer that shares their values and that they can trust. They want to work for a company, he said, that wants to do well and do good. He added that volunteering opportunities that are attractive to many employees also offers companies “a terrific way to teach leadership skills, build teamwork and make valuable business connections.”
Kuehn advised attendees that the key to getting CFOs more interested and involved in sustainability is to align it with the company’s core strategies.
“If it’s too far removed from what you do best it’s hard to keep it going,” he said. Referring to the five reasons CFOs should care, Kuehn suggested that if corporate citizenship practitioners “can link into some of these, I think you’ll find you get a little longer time at the table and find some synergies that didn’t exist before.”
