More Companies to Step Up Investment in Sustainability

Despite the economic downturn and tenuous recovery, more than two-thirds of businesses are strengthening their commitment to sustainability, according to a new global study by MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG).

 

The study, released in a report titled Sustainability: The ‘Embracers’ Seize Advantage, found that 69 percent of companies plan to step up their investment in and management of sustainability this year. Just over one-quarter (26 percent) plan no change, and only 2 percent intend to cut back on their commitment.

 

The study also found that a two-speed landscape is emerging, with a gap between sustainability “embracers”—those who place sustainability high on their agenda—and nonembracers or “cautious adopters,” who have yet to focus on more than energy cost savings, material efficiency, and risk mitigation.

 

Embracers are significantly more confident about their competitive position than nonembracers are. Seventy percent of embracers said they believe their organizations outperform industry peers. By contrast, only 53 percent of cautious adopters described themselves as outperformers, and 14 percent admitted to lagging behind peers—more than twice the percentage of embracers who made the same claim (6 percent).

 

In addition, nearly three times as many embracers (66 percent) than cautious adopters (23 percent) said that their organization’s sustainability actions and decisions have increased their profits.

 

“What’s fascinating is that our findings depict a business landscape in general that’s tilting hard toward where the embracers already are,” said Michael Hopkins, editor-in-chief of MIT SMR and a coauthor of the report. “So the embracers have handed us a kind of crystal ball. Their insights and behaviors suggest a blueprint for how management practice and competitive strategy will evolve.”

 

The report identifies seven specific practices exhibited by embracer companies—which together begin to define sustainability-driven management. Among the other findings:

 

• Improved brand reputation is perceived as the biggest benefit of addressing sustainability: nearly 50 percent of respondents cited it.
• Automotive is seen as the industry for which sustainability is most critical now: 80 percent of executives said sustainability-related strategies are necessary to be competitive in the auto sector.
• By contrast, only 29 percent of respondents thought sustainability strategies are currently necessary for the media and entertainment industry. But another 51 percent said they will be necessary in the future.

• The commitment of the cautious adopters to sustainability is increasing at a far faster rate than that of the embracers. The number of cautious adopters planning to increase investment and management attention jumped from 51 percent last year to 63 percent this year—a 24 percent increase.

 

At the same time, the percentage of embracers planning similar increases, though high, remained flat at a little under 90 percent.“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,” notes Knut Haanaes, a BCG partner and managing director and coauthor of the report. “Those not already putting sustainability at the heart of their business will need to do so in the near term.”

 

 

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