Net Balance Applies A Unique Business Model To Sustainability
In 2006 global engineering consulting firm URS decided to move away from sustainability reporting assurance. Passionate about the work he was doing, the team’s lead assurance provider, Terence Jeyaretnam, was faced with a difficult choice – join one of the “big four” accounting firms or set up his own consultancy. Wanting to create a business that was different to other firms operating in the same space, Terence chose to go it alone. It’s a difference that has paid off. Growing from just Terence in January 2007 to around 50 people now, Net Balance has added about one extra person per month to the team. It’s a rate of growth that will continue for the foreseeable future.
Environmental, social, climate change and economic services
“We are a sustainability advisory firm with an emphasis on providing both strategic and sound technical advice,” says Terence. “We focus on measurement and results, as these are areas that are often not done well.”
The business is active in the many areas related to sustainability, from waste management and air quality, through carbon management and climate change adaptation to social responsibility and community investment. Services include compliance and audit, strategy development, advisory services and implementation and training.
Growth by talent
Unlike most businesses that recruit staff to fulfill the available work, Net Balance creates opportunities for talented people who are capable of contributing to growing the business. Most recruits come from consulting backgrounds and have existing client networks. In the early days, Net Balance recruited on the basis of passion, with capability a secondary consideration. However, it soon became apparent that idealism needs to be tempered with business realism, so capability is now rated of equal importance, and the recruitment process much more rigorous.
The business fosters a culture of autonomy. “Everyone is encouraged to contribute across the business,” says Terence. “We want them to take on internal process improvement and business development initiatives, to write blogs and to develop new networks and partnerships. We also provide them with the flexibility to travel, to telecommute and to study.” It’s an environment in which teams spontaneously form to take on projects of mutual interest.
Another big difference from most businesses is that everyone contributes time to the not-for-profit Net Balance Foundation, a feature of the business right from the start. This supports research in conjunction with NGOs, industry associations and other groups, and also provides assistance to smaller businesses and organisations that can’t afford the usual fees charged by sustainability advisory practices. Collectively, the firm aims to contribute 20% of its time to the foundation.
Terence describes the Net Balance approach as “commercial socialism”. Aside from the Foundation, this refers to the profit-share scheme, the emphasis on a non-hierarchical structure and the way the team members treat each other. “However,” notes Terence, “to be able to dedicate 20% of our work to non-profit making activities and still remain financially viable, we need to be more acutely commercial than our competitors.” The business has a culture of careful cost management, and a policy of being cash flow positive on a quarterly basis.
As for ownership, the firm is investigating employee share ownership, and is seeking a structure that works for the business.
Trust builds business
Much of firm’s success derives from the high level of trust that develops between Net Balance and its clients. For ethical reasons there are companies that Net Balance chooses not to work with and this helps to engender mutual respect. Then having gained trust in one area of service, clients are more comfortable with engaging Net Balance to deliver additional services.
Terence is motivated by a desire to see private companies recognise the value of sustainability and to use it to improve their performance. His aim is for Net Balance to provide a good role model for professional services firms and to generate noticeable change in the corporate world.
As for clients, Terence identifies three motives for them to call upon Net Balance’s services. “For some it’s a matter of complying with various codes, and that makes up about 40% of our business. A further 40% of our clients want to take voluntary action to meet the standards set by their peers. The remainder is made up of clients who want to be leaders in sustainability.”
Net Balance minimises its own waste and energy use and offsets its greenhouse gas emissions. It also publishes an annual sustainability report covering its environmental and social performance. “It makes us think clearly about how we do business and manage our environmental and social impacts,” says Terence. “However, our biggest contribution is through our work. Unfortunately this is a difficult area to quantify, but it is work in progress”.
Growing, but not for its own sake
As the business grows investment is being made in systems and processes to increase efficiency and meet the needs of a larger team. Further growth is planned, but not for its own sake. “It’s all about attracting the right people,” says Terence.
A certain critical mass is required to compete against larger firms, and Terence feels Net Balance is now at the point. His aim is to grow at the same rate as the market for sustainability services, which will see the team double in size over the next five years. Most of that growth will happen outside of the Melbourne head office. (Incidentally, that equates to a growth rate of around 15% pa, putting the sustainability sector well ahead of the general economy.)
One of Terence’s goals is for Net Balance to be the firm that first comes to mind when potential clients think of sustainability. Based on the success of the Net Balance experiment so far, that goal is well within reach.