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Sustainability Contributing to Corporate Profits, Finds Study

Sustainability Contributing to Corporate Profits, Finds Study

by CFO Innovation Asia Staff, 25 January 2012
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Sustainability now occupies a central and permanent place in corporate boardrooms; 31% of companies say sustainability is contributing to their profits, and 70% have placed sustainability permanently on their management agenda, according to a new global study by MIT Sloan Management Review (MIT SMR) and Boston Consulting Group (BCG).

 

The study, released in a report titled "Sustainability Nears a Tipping Point," found that two-thirds of companies see sustainability as necessary to being competitive in today’s marketplace, up from 55% a year earlier.  In addition, two thirds of respondents said management attention to, and investment in, sustainability has increased in the last year.

 

The study focuses on “Harvesters”—the 31% of companies that say that sustainability is contributing to their profits.  Harvesters are not merely implementing individual initiatives such as lowering carbon emissions, reducing energy consumption, or investing in clean technologies; they are changing their operating frameworks and strategies.

 

Harvesters tend to have a distinctive organisational mind-set and design that supports sustainability.Compared to non-Harvesters, Harvesters are three times as likely to have a business case for sustainability. They are also 50% more likely to have CEO commitment to sustainability, twice as likely to have a separate sustainability reporting process and twice as likely to have a separate function for sustainability.

 

Harvesters are also 50% more likely to have a person responsible for sustainability in each business unit and more than 2.5 times as likely to have a chief sustainability officer.

 

“Although many companies are still struggling to define sustainability in a way that is relevant to their business, the attention and investment we see indicate the here-to-stay nature of sustainability for organisations everywhere,” says David Kiron, executive editor at MIT SMR and a coauthor of the report.

 

The report identifies three key areas where sustainability has driven significant organisational change among Harvesters.

 

The first is organisational structure. Managers at Harvester companies are often supported by a separate cross-functional senior management committees that can sanction as well as support corporate sustainability objectives.

 

In the business model area, 57% of Harvesters say they have a business case for sustainability, compared to just 18% among the rest of the respondents.

 

The third area identified is operations. The study finds that greater collaboration among geographic business units is a hallmark of Harvesters’ sustainable business practices. And, Harvesters collaborate more with customers and suppliers than other companies.

 

"There’s a learning curve to incorporating sustainability into strategy," explains Knut Haanaes, a BCG partner and coauthor of the report, who leads the firm's Sustainability practice. "Companies that have had it on their agenda and have worked on it for years are now seeing tangible results."

 

Haanes says the research suggests a pattern: First a company focuses on reducing costs, boosting efficiency, and enhancing its corporate reputation. Then, after a while, it takes a broader view, becoming innovative with products and processes, and gaining access to new markets.

 

 

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