Corporate Sustainability: It's All About Survival
Corporate Sustainability: It's All About Survival
In a world of rising energy prices, increased scarcity of natural resources, rampant changes in our climate, growing competition from emerging economies, and increased consumer concern about the quality of life, health and safety, corporate sustainability is synonymous with corporate survival.
Surprisingly, that message is not getting through to many CEOs.
Only half of the businesses recently polled on a global survey of corporate sustainability reported having a formal sustainability strategy. The survey also showed with such strategies were more focused on improving public perceptions or responding to increased regulation, than meeting broader societal needs or generating revenue opportunities.
More than 75 percent of the respondents said sustainability was an important part of their organization’s corporate strategy, or would become so in the future. But a string of reports indicates companies need to spend less time thinking about sustainability and more time putting it into action.
CEOs made up the majority of respondents of the poll developed by the Vandiver Group, an award-winning strategic communications firm, and sponsored by PR firm Pinnacle Worldwide. This is ironic, because the same study shows that CEOs are the primary drivers of sustainability decisions, with communications and public affairs managers rarely in that role.
Other facts emerging from the survey:
- More than 65 percent of companies do not have dedicated sustainability staff;
- Of those with dedicated staff, nearly half have fewer than five employees working more than half of their time on sustainability;
- "Improving perception of the company" was rated as more important than increasing revenue via sustainability programs.
- Nearly half of companies surveyed have less than $50,000 allocated annually to sustainability-related programs; only 10 percent have more than $50,000 so allocated.
There is a depressing similarity to these findings and those of a 2004 study conducted by the Certified General Accountants Association of Canada. In partnership with the CGA-Canada Research Foundation, this study also found that only half of the companies surveyed provided some coverage of their social or environmental performance. Regulatory requirements (49.5 percent), stakeholder pressure (21.4 percent), and corporate image objectives (12 percent) were the most important factors influencing decisions on corporate sustainability according to that report.
Sustainability Pays Off
However, a more recent report by GMA and PricewaterhouseCoopers (PwC) indicates that companies that employ sustainability practices and share sustainability data generally experience higher gross margins and return on sales, higher return on assets, and stronger cash flow and rising shareholder return.
A similar report prepared by Natural Marketing Institute (NMI) suggested that many companies have identified very profitable ways of being good environmental stewards, allowing environmental issues to move from a "liability" to an "asset." The example most frequently cited is GE’s Ecomagination campaign, which has proven that selling green products can produce clear and substantial bottom-line results.
GE, like many other major retailers, was quick to capitalize on growing consumer desire for sustainable products and services.
Jargon aside, more companies are catching on to the notion that one can do well by doing good, and catering to the sustainable market segment is picking up steam in North America and Europe, and in parts of Asia.
But Corporate Responsibility in its broadest sense goes far beyond the short term market gains of catering to high end consumers that can afford to buy environmentally sound products and services.
Companies that are involved in major resource development activities or which are active in the developing world see a more fundamental dimension of corporate responsibility, namely contributing to the necessities of life that are in short supply to over two thirds of the world’s population -- clean drinking water, safe cities, adequate housing, meaningful employment, access to health and education, and most importantly stable food supply.
The U.N. predicts that by 2025, two-thirds of the earth’s population will be living in areas suffering from scarcity of water, due to growing populations, rapid economic development, droughts and changes caused by global warming. Already there are fears of massive starvation in many parts of the world due to skyrocketing prices and plummeting food supplies, in part driven by rising energy costs.
Responsible corporate leaders see these conditions as a call to action simply because no one benefits from chaos and no company can survive in conditions of high civil unrest, destabilized government structures, inequitable markets, and starvation.
The World Business Council on Sustainable Development (WBCSD), a Geneva-based international coalition of leading corporations, is committed to the proposition that free markets, the end of poverty, environmental responsibility and corporate citizenship are the keys to a sustainable future for mankind. This is not utopian rhetoric, but the hardnosed reality that business can only prosper when the world prospers.
WBCSD has its counterparts in Canada, namely the EXCEL Partnership, a coalition of leading Canadian Corporations and senior executives that have committed themselves to developing, integrating and improving sustainable development principles into their corporate strategies and practices. Established in 1996 the EXCEL Partnership is an initiative of the GLOBE Foundation of Canada.
EXCEL’s influence has reached beyond the corporate world and members regularly work closely with governments on sustainability and competitiveness issues.
Are Things Changing?
Most of the reports cited earlier note that sustainability concerns are unlikely to diminish. And certainly the work of the EXCEL Partnership is based on the premise that the hallmarks of business success in the future will include a transparent and sincere commitment to sustainability principles in all aspects of corporate behavior.
Therefore, recognizing and understanding this trend allows an organization to gain a strategic advantage in the marketplace, according to the NMI report. The idea may be taking hold -- at least in Canada.
In an April 2008 report released by Stratos Inc., a business consulting firm, it would appear that a growing number of Canadian companies are finally getting the message. The report found that over the past 15 years there are signs of growth and improvement in sustainability reporting. Today, corporate sustainability reporting is a core element in the business strategies of 47 of the 265 companies on the Toronto Stock Exchange (TSX) Composite Index.
Similar to both the Ipsos poll and the NMI report, the Stratos study speculates that as sustainability reporting gets more strategic and sustainability issues become more frequently addressed in corporate reporting, stakeholder and consumer confidence in the numbers, procedures and practices being reported on will grow.
"Disclosure of information on sustainability performance is routine now among large Canadian corporations. We expect the next few years to see dynamic improvements with companies looking hard at how they can differentiate themselves through their sustainability reporting," said George Greene, Chair of Stratos.
What Does it All Mean?
Volumes have been written on corporate sustainability, but to reduce it to its core elements what is at stake is defining and adopting a strategic framework that makes sustainability the core of the company’s vision and embedding those values in every part of the business. It’s a concept that lives through actions, not words. Walking the talk is more than a trite expression. It is the essence of the strategy.
To make it work, sustainability requires leadership from the top, board level support, firm rules and guidelines to shape management decision making at all levels, empowering people and rewarding success.
Leadership counts. If the occupants of the corner offices or the attendees at board meetings don’t see the connection, it is highly unlikely that those beneath them will see it either.
Most of all, corporate sustainability is all about ensuring survival is an increasingly uncertain world.