An overwhelming majority of corporate executives believe that sustainability-related issues are having or will soon have a material impact on their business. Yet relatively few companies are taking decisive action to address such issues, according to a new study by MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG).
The study, titled "The Business of Sustainability," was released recently in two publications—a detailed special report by MIT SMR and a summary report by BCG. The findings are based on a global survey of more than 1,500 corporate executives and more than 50 in-depth interviews with experts from a range of disciplines such as energy science, civil engineering, management, and urban studies.
“What came across loud and clear is that sustainability is having an increasingly significant impact on business, and executives are placing it high on the corporate agenda,” remarks Maurice Berns, a BCG partner and a lead author of the report. “But we also found a wide gap between intent and action. Simply put, a majority of companies are not acting decisively to exploit the opportunities and mitigate the risks that sustainability presents. The findings should be a wake-up call to executives that if they want to make progress on sustainability, it’s time to get serious.”
The five companies cited most often by survey respondents as “world class” in addressing sustainability were General Electric, Toyota, IBM, Royal Dutch Shell, and Wal-Mart.
Although almost all the executives in the survey (92%) said that they were trying to address the issue of sustainability, most said that their companies were either not taking bold action on sustainability or falling short on execution.
Less than a third of survey respondents said that their company has developed a clear business case for addressing sustainability.
The study identified three major barriers to decisive corporate action: a lack of understanding of what sustainability is and what it means to an enterprise; difficulty modeling the business case; and flaws in execution, even after a plan has been developed. But the risks of failing to act decisively are growing, according to many of the thought leaders interviewed.
The research indicates that once companies begin to pursue sustainability initiatives in earnest, they tend to unearth opportunities to reduce costs, create new revenue streams, and develop more innovative business models.
Sixty-eight percent of business leaders with sustainability expertise cited improved financial returns as a benefit from their organization’s investments in sustainability initiatives, compared with only 32% of novices.
To help companies mobilize around sustainability, the authors offer a diagnostic tool that executives can use to assess their company’s sustainability progress from a managerial perspective. This “sustainability audit” is meant to help organizations gauge the extent to which they have framed a sustainability agenda, developed a business case for it, and executed their strategy.