Are businesses ready for sustainability? CEOs certainly think so

By Subir Ghosh|20th Apr 2015
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The talk about sustainability has been on for a while. And the responsibility, to a considerable extent, of moving towards a sustainable world lies with businesses. But are corporations ready for the cleansing act? Are they willing to change themselves so that the world too changes in the bargain? On the face of it, apparently many industry leaders are rising to the sustainability challenge. At least, they assert so.

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Corporate leaders now are definitely more persuaded of the value of sustainability. Some 71 per cent of respondents (69 per cent for corporate respondents) to a recent survey have said that their CEO or organisational leader has taken the arguments on board. Even where corporate leaders are not fully engaged, sustainability is becoming increasingly important for strategy – 87 per cent of the respondents agreed to this (89 per cent for corporate respondents). Sustainability as a key strategic issue is becoming almost impossible to ignore, according to the findings of the 'State of Sustainability 2015' report.

Based on responses of nearly 1,500 sustainability professionals worldwide, and with 34 pages of expert analysis, including nearly 30 different charts and graphs and over 8,500 words of analysis, the report contends,

"Within companies, sustainability is becoming well embedded. By large majorities, our respondents said that sustainability teams must take on board the roles of executing the sustainability strategy, or to defining the strategy for others to execute, in addition to the roles of offering training, spreading knowledge about sustainability and monitoring performance."

The report has been published by Ethical Corporation, a business intelligence consultancy based in the UK.

On paper, at least, things look fine. “Companies are highly focused on sustainability in their supply chains, indicating that they have grasped that sustainability is a global issue and that corporate responsibility extends as far as the furthest reaches of the supply chain,” it said. The supply chain issue was the top priority for sustainability in strategy setting for the most respondents.

Thankfully, this new consciousness does not seem to be that market-driven. The overlap between marketing and sustainability is now present in only a few organisations – 7.5 per cent of sustainability teams report to the head of marketing or communications. In roughly 54 per cent of the companies, the sustainability team reports directly to board or the CEO. Less than a fifth (19 per cent) said that reporting was done to the head of sustainability. Some would argue that this is still market-driven.

And, how are they going about it? Responses to the question ‘Do you pay any external organisation for advice/assistance with your sustainability strategy?’ indicated potentially rich pickings for sustainability consultants. Close to half of corporate respondents (46 per cent) said they do. “This could indicate both solid existing demand for sustainability advice, and significant scope for consultants to put their persuasive talents to work to win new customers,” the report pointed out.

This bit, most are doing through engagement strategies for a range of groups. From 49 per cent having a strategy for engagement with academic communities to 73 per cent engaging with industry associations, most corporate are looking for outside help. In about two thirds of cases, corporate respondents said they had engagement strategies for non-governmental organisations and the media.

Being aware of a problem is one thing, and doing enough to eradicate it is quite another. These fundamental issues lie somewhat buried in the report. Only 21 per cent of corporate respondents said their company was “leveraging the potential of sustainability as fully as possible, even though relatively high proportions of respondents said revenues and savings are already being generated by sustainability.” Moreover, only a third of the respondents were able to say that they were measuring the return on investment of sustainability, or that they could say with confidence that they accurately measure the impact of their sustainability initiatives. That’s the slip between the cup and the lip.

The report has a major loophole – that about transparency. Though about four out of five respondents did insist that sustainability drives led to increased transparency, there were no questions in the survey that were about measures taken by businesses in ensuring transparency about their sustainability measures. If businesses remain opaque, it can only harm their image.

The sustainability buzz has been ringing in business circles for a while – particularly since the 2009 study by global management consulting firm AT Kearney, whose findings indicated that firms with "true commitment to sustainability" outperform industry peers in the financial markets.

The study, 'Green Winners: The Performance of Sustainability-Focused Companies in the Financial Crisis'," had concluded that "green" products and services as well as the firms that produce them showed resilience through the economic downtown. The study looked at 99 firms on the Dow Jones Sustainability Index and the Goldman Sachs SUSTAIN focus list of green companies and tracked stock price performance for six months through November 2008. In 16 of 18 industries included in the review, businesses deemed "sustainability focused" outperformed industry peers over three- and six-month periods and were "well protected from value erosion."

This does not mean that the issue is an open-and-shut case: that sustainable business always makes profit. But yes, sustainability IS better business.

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