LONDON, — Conventional wisdom holds that emerging markets cannot accommodate sustainability concerns in their efforts to achieve economic growth. However, a recent
report by SustainAbility, a London-based research and consultancy firm, has concluded that the opposite it true.
The report, titled “Developing Value: The Business Case for Sustainability in Emerging Markets,” documents the business benefits of practicing sustainability in emerging markets through a “Sustainable Business Value” matrix. To illustrate how companies operating in emerging markets can enhance their value by employing sustainability practices, the report points to 240 corporate examples from more than 60 countries.
“We looked at seven sustainability factors and their impact on six financial performance measures. There were thus 42 possible linkages, or 42 possible businesses cases,” said Jodie Thorpe, the SustainAbility analyst who authored the report. “Our results were plotted on a matrix so that we could get an overall picture of where the greatest 'business case' evidence was. The online version [of the matrix] is clickable, so you can drill down into particular cells and see the cases which correspond to that cell.”
Of the 42 “cells,” or squares representing potential convergence between sustainability factors and business factors, 7 indicate strong evidence in support of a business case for sustainability. Clicking the intersection of the sustainability factor “environmental process improvement” with the business factor “cost savings and productivity” yields a list of 44 specific examples, making it the strongest business case for sustainability.
The matrix also displays six squares that indicate no evidence of a correlation between sustainability and business success, as well as 27 squares that indicate some evidence of a correlation. The report cautions against viewing the matrix as formulaic, since the business opportunities of the various sustainability strategies differ depending on the particular drivers, circumstances, and priorities of companies.
The SustainAbility report encourages investors and other stakeholders to reward companies practicing sustainability in emerging markets and to pressure companies with poor environmental and social performance to enhance their sustainability. The role of investor pressure on emerging markets has gained high visibility recently with the decision by the California Public Employees’ Retirement System (CalPERS) to withdraw investment from entire countries in emerging markets. Critics of this move charge that making sweeping decisions may not be as productive as making decisions on the company level.
“I do believe that the results of Developing Value broadly support the critics' charge that CalPERS should engage at the company level,” Ms. Thorpe told SocialFunds.com. “If companies are not being rewarded by the financial markets for their good corporate governance behavior, it certainly seems to me that this will be a disincentive.”
