4 ways companies can embed sustainability into long-term business strategy
In WRI's recent working paper, "Aligning Profit and Environmental Sustainability: Stories from Industry," we identify four recommendations that can help scale up these good ideas, including:
• Set goals that integrate environmental considerations into core business decision-making
This can be achieved by reflecting environmental benefits in required payback periods or hurdle rates for projects that provide the company with important experience with low-carbon technologies and process changes. UPS, for example, relaxes the "hurdle rate" -- the minimum rate of return required by the company -- on certain vehicles it tests as part of its "rolling laboratory" for its fleet. These vehicles have the potential to reduce fuel use and costs over time.
• Implement internal mechanisms that ensure environmental sustainability is valued
Support public policies that put a stable price on externalities like GHG emissions and other environmental risks. For example, Greif took a life cycle GHG view of its business operations to identify how new business growth could be achieved while reducing life cycle GHG emissions. Other companies have joined coalitions like the U.S. Climate Action Partnership, which strongly call for public policies to address climate change.
• Vest the chief sustainability officer with greater authority over capital budget decisions and engage the sustainability team early in project planning
Giving the CSO some authority over financial planning, as Alcoa and AkzoNobel have done, can help ensure that the aspirations to improve environmental performance -- which are often only enshrined in a company's sustainability goals -- are integrated into how the company invests its money.
• Establish and manage metrics that comprehensively indicate risks and opportunities across the corporate value chain
For example, understanding supply chains' cost to society, as Natura does through its supplier engagement program, can help companies choose suppliers that mitigate environmental risk and provide value. Companies that do not measure the environmental impact of their actions across the value chain may be missing important risks that should be mitigated, as well as opportunities to improve their environmental performance and save money.
The good news is that we're already learning from the examples of business leaders who are aligning profit goals with environmental sustainability. Mainstreaming their best practices and innovating new ones can help put the world on a trajectory for a truly environmentally sustainable economy.
Chalk board image by Creativa via Shutterstock.