January 26, 2012

Nearly a Third of Companies Say Sustainability Is Contributing to Their Profits, New Report Finds: More Than Two-Thirds of Companies Have Placed Sustainability Permanently On Their Management Agenda

Sustainability now occupies a central and permanent place in corporate boardrooms, as 31% of companies say sustainability is contributing to their profits, and 70% have placed sustainability permanently on their management agenda, according to a new global study by MIT Sloan Management Review (MIT SMR) and the Boston Consulting Group (BCG). The study, released this week in a report titled Sustainability Nears a Tipping Point, found that two-thirds of companies see sustainability as necessary to being competitive in today's marketplace, up from 55% a year earlier. In addition, two-thirds of respondents said management attention to, and investment in, sustainability has increased in the last year. The study focuses on "Harvesters" — the 31% of companies that say that sustainability is contributing to their profits. Harvesters are not merely implementing individual initiatives such as lowering carbon emissions, reducing energy consumption, or investing in clean technologies; they are changing their operating frameworks and strategies. "Although many companies are still struggling to define sustainability in a way that is relevant to their business, the attention and investment we see indicate the here-to-stay nature of sustainability for organizations everywhere," said David Kiron, executive editor at MIT SMR and a coauthor of the report, in a news release. "Further study of the Harvesters will refine where the true tipping point is, when the management focus on sustainability will rival that of marketing or human resources or other key drivers of performance."

The third annual Sustainability & Innovation Global Executive Study by MIT SMR and BCG comprises a survey of more than 2,800 corporate leaders representing every major industry and region of the world and a series of in-depth interviews with experts and corporate practitioners from a range of disciplines and organizations.

Harvesters tend to have a distinctive organizational mind-set and design that supports sustainability. Compared to non-Harvesters, Harvesters are three times as likely to have a business case for sustainability. They are also 50% more likely to have CEO commitment to sustainability, twice as likely to have a separate sustainability reporting process and twice as likely to have a separate function for sustainability. Harvesters are also 50% more likely to have a person responsible for sustainability in each business unit and more than 2.5 times as likely to have a chief sustainability officer.

The report identifies three key areas where sustainability has driven significant organizational change among Harvesters:

• Organizational structure: Managers at Harvester companies are often supported by a separate cross-functional senior management committees that can sanction as well as support corporate sustainability objectives.
• Business model: 57% of Harvesters say they have a business case for sustainability, compared to just 18% among the rest of the respondents.
• Operations: Greater collaboration among geographic business units is a hallmark of Harvesters' sustainable business practices. And, Harvesters collaborate more with customers and suppliers than other companies.

"There's a learning curve to incorporating sustainability into strategy," said Knut Haanaes, a BCG partner and coauthor of the report who leads the firm's Sustainability practice, in the release. "Companies that have had it on their agenda and have worked on it for years are now seeing tangible results. Our research suggests a pattern: First a company focuses on reducing costs, boosting efficiency, and enhancing its corporate reputation. Then, after a while, it takes a broader view, becoming innovative with products and processes, and gaining access to new markets."