To illuminate how the transformation occurs in a company and how a sustainable strategy can be formulated and executed, we studied the organizational models that we refer to as “sustainable” by comparing them with companies that we call “traditional.” We focused on two primary questions:
1. How does a sustainable company create the conditions that embed sustainability in the company’s strategy and operations?
2. What are the specific elements of sustainable companies’ cultures that differentiate them from those of traditional companies?
Our study found that some of the most pronounced differences between sustainable and traditional companies are the presence of mechanisms for execution and how they are used. Sustainable companies are far more likely to have enterprise-wide management systems for executing sustainable strategies (83 percent vs. 20 percent for traditional companies).
These systems consist of structured frameworks of practices and procedures that enable the organization to execute in a consistent and lasting manner. Since specific sustainability objectives often involve trade-offs, an enterprise-wide approach allows for a portfolio perspective to achieve the desired balance among actions and outcomes.
Among the enterprise-wide management systems companies use are processes that connect sustainability to corporate strategy, with direct ties to performance evaluation and compensation (66 percent vs. 10 percent for traditional companies). Sustainable companies also incorporate sustainability metrics into the capital budgeting process, develop solid valuation processes that take externalities into account, set clear targets for sustainability objectives and establish targeted programs linking the objectives to business results (90 percent vs. 10 percent for traditional companies).
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