The 4 biggest barriers to corporate sustainability
[Editor's note: This is the first installment of WRI's five-part series, "Aligning Profit and Environmental Sustainability." Each post, which will run on Thursdays for the next four weeks, will offer solutions for businesses to better integrate environmental sustainability into their operations.]
Implementing corporate environmental sustainability strategies is increasingly becoming standard practice. More than 300 firms on the S&P 500 index, for example, report their greenhouse gas inventories each year to the Carbon Disclosure Project. Fortune 100 and S&P Global 100 companies are investing billions of dollars to reach renewable energy procurement targets. Some companies are going further and taking steps to reduce the environmental impact of their products, services and supply chains.
Despite this encouraging progress, a confluence of global environmental challenges is putting more pressure on corporate environmental sustainability strategies to get to scale quickly. Not enough global businesses have integrated environmental sustainability into their long-term decision-making. And, as it stands today, existing practices are not enough to protect the natural resources that society and businesses depend on.
WRI examines this gap between existing corporate sustainability practices and the environmental protection needed for the 21st century in our new report, "Aligning Profit and Environmental Sustainability: Stories from Industry." We interviewed sustainability managers from AkzoNobel, Alcoa, Citi, Greif, Johnson & Johnson, Mars, Natura and Siemens to better understand why strategies that are good for both business and the planet are not getting to scale.
We identified four barriers in these discussions, as well as ways companies can overcome them:
1. Improved environmental sustainability is not valued in internal capital allocation decisions
Companies often lack the internal mechanisms to properly value the benefits of managing environmental sustainability, such as reduced exposure to energy price volatility, water risks and other environmental impacts of operations and supply chains.
2. The goals of corporate sustainability teams and financial teams are not well-aligned
Divergent priorities mean that sustainability teams and financial teams often do not effectively engage each other. As a result, sustainability teams are brought into project planning too late to influence project design and cannot make an effective case to financial decisionmakers.
3. Companies lack metrics to account for external environmental costs
Without a clear method to price external costs, such as the risk of climate change to society, companies can't factor these "expenses" into their traditional decision-making. Companies may find they are not fully cognizant of the real costs and risks associated with their investments over time.
4. Environmental factors, such as climate change and water scarcity, are not being fully integrated into long-term business strategy
As a result, companies often miss opportunities to improve financial performance through environmental improvements in processes and product lines.
Overcoming corporate environmental sustainability barriers
The good news is that businesses are finding ways to overcome these barriers by, in many cases, adapting strategies and techniques already at their disposal.
Over the next month, we'll outline ways that corporations can better integrate sustainability into their everyday decision-making through our blog series, "Aligning Profit and Environmental Sustainability." Tune in every Thursday to learn how multinational companies like AkzoNobel, Alcoa, Citi, Greif, Johnson & Johnson, Natura and Siemens are tackling these challenges.