Sustainability: Brand Reputation Enhanced

The business impact of sustainability and environmental initiatives has provoked fierce debate since the 1970s. Those opposed characterize it as an exercise in political correctness unsupported by factual evidence for either depth of the supposed harms or the benefits of the cures.

Adherents, who appear to be winning the day, point to a growing body of statistically significant data underpinning the claims that corporate sustainability initiatives produce both substantial cost-savings and reputational benefits.

In a new report from the Massachusetts Institute of Technology (MIT) and the Boston Consulting Group, those positive assertions are given added weight. In excerpts from the study reprinted here (the entire report can be downloaded from the MIT website), the benefits - and what kinds of companies are seizing them - are described. JL:

How fast are businesses adopting sustainability-driven management? New study results reveal two distinct camps: 'embracers' and 'cautious adopters.' And the practices of the embracers may be providing a snapshot of how the management future will look.

This report on the second annual Sustainability & Innovation Global Executive Study by MIT Sloan Management Review and The Boston Consulting Group reveals two distinct camps of companies: “embracers” — those who place sustainability high on their agenda — and “cautious adopters,” who have yet to focus on more than energy cost savings, material efficiency, and risk mitigation.
SPECIAL REPORT: Sustainability & Innovation: The ‘Embracers’ Seize Advantage

The report identifies seven specific practices exhibited by embracer companies, which together begin to define sustainability-driven management. These include the need to move early, even if you don’t have complete information; to be authentic and transparent both internally and with the external stakeholders; and to work aggressively to “de-silo” sustainability, integrating it throughout company operations.

Findings
• Improved brand reputation is perceived as the biggest benefit of addressing sustainability.

• Automotive is seen as the industry for which sustainability is most critical now.

• The commitment of the cautious adopters to sustainability is increasing at a far faster rate than that of the embracers.

• Most companies — whether currently embracers or not — are looking toward a world where sustainability is becoming a mainstream, if not required, part of the business strategy.

Preface and Summary: A Sweet Spot on the Adoption Curve?

While global economic and political factors might have predicted otherwise, corporate commitments to sustainability-driven management are strengthening.

But even as enterprises overall are strengthening their commitments, one cohort of organizations is expanding its commitments far more aggressively than others — and a gap has emerged between sustainability strategy leaders (“embracers”) and laggards (“cautious adopters”).

Those are among the key findings yielded by the second annual Sustainability & Innovation survey of global corporate leaders — a collaborative study by The Boston Consulting Group and MIT Sloan Management Review. How are organizations responding to the challenges and opportunities of sustainability? How are the terms of competition shifting — or not shifting — in the face of sustainability concerns? How is cutting-edge management practice being transformed as a consequence? Those are the questions explored in this study, through both the global survey and a series of in-depth research interviews with thought leaders and business executives. This report contains the study’s results.

The discovery of broad-based growth in sustainability-related investments is explained in part by further findings that companies increasingly believe sustainability will become a source of advantage, should be incorporated strategically in all aspects of a business’s operations and eventually will require a sea change in competitive behavior. “We need to integrate sustainability, not as a layer, but in the fabric of the business,” argues Katie Harper, manager, sustainable supply chains at Sears Canada, voicing a common view.

“The only way to continue growing and continue being a successful business is to treat sustainability as a key business lever in the same way that you treat marketing, finance, culture, HR or supply chain,” says Santiago Gowland, vice president of brand and global corporate responsibility at Unilever. “So really it’s core to the ability of the business to grow.”

While the survey revealed that most companies view sustainability as eventually becoming “core,” what’s more interesting is the revelation that one camp of businesses — the embracers — is acting on the belief that it is core already. Whereas cautious adopters see the sustainability business case in terms of risk management and efficiency gains, embracer companies see the payoff of sustainability-driven management largely in intangible advantages, process improvements, the ability to innovate and, critically, in the opportunity to grow. And the embracers, it turns out, are the highest performing businesses in the study.

Who are the embracers? What do they do differently? By tracking what the embracer companies are doing that stands out from the actions of more cautious adopters — and how those strategies are paying off — this report paints a picture of what management may look like in a world increasingly driven by the sustainability agenda.

Executive Summary

Sustainability spending has survived the downturn, with almost 60% of companies saying that their investments increased in 2010. Companies are committing to sustainability but investment levels vary, with companies dividing into embracers and cautious adopters.

Embracer companies are implementing sustainability-driven strategies widely in their organizations and have largely succeeded in making robust business cases for their investments. All companies — both embracers and cautious adopters — see the benefits of strategies such as improved resource efficiency and waste management.

All companies recognize the brand-building benefits of developing a reputation for being sustainability-driven. This benefit was rated greatest by all respondents (including both embracers and cautious adopters). While even embracer companies still struggle to measure financially the more intangible business benefits of sustainability strategies (such as employee engagement, innovation and stakeholder appeal), these companies are nevertheless assigning value to intangible factors when forming strategies and making decisions.

Companies across all industries agree that acting on sustainability is essential to remaining competitive. Embracers are more aggressive in their sustainability spending, but the cautious adopters are catching up and increasing their commitments at a faster rate than the embracers. They plan to increase their investments by 24% in 2011, while the commitments of embracers (already high) remain static.

The sustainability-driven management approaches of embracer companies — which claim to be gaining competitive advantage via sustainability — exhibit seven shared traits that together suggest how sustainability may alter management practice for all successful companies in the future.