Corporate leaders lag on  sustainability, says study

An overwhelming majority of corporate executives believe that sustainability-related issues are having or will soon have a material impact on their business. Yet relatively few companies are taking decisive action to address such issues, according to a new study by MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG).

The study, titled "The Business of Sustainability," is being released today in two publications -- a detailed special report by MIT SMR and a summary report by BCG. The findings are based on a global survey of more than 1,500 corporate executives and more than 50 in-depth interviews with experts from a range of disciplines such as energy science, civil engineering, management, and urban studies.

"What came across loud and clear is that sustainability is having an increasingly significant impact on business, and executives are placing it high on the corporate agenda," remarked Maurice Berns, a BCG partner and a lead author of the report. "But we also found a wide gap between intent and action. Simply put, a majority of companies are not acting decisively to exploit the opportunities and mitigate the risks that sustainability presents. The findings should be a wake-up call to executives that if they want to make progress on sustainability, it's time to get serious."

Although almost all the executives in the survey (92 percent) said that they were trying to address the issue of sustainability, most said that their companies were either not taking bold action on sustainability or falling short on execution.

--  Less than a third of survey respondents said that their company has
    developed a clear business case for addressing sustainability

--  Less than 45 percent said their organizations were pursuing basic
    sustainability strategies such as reducing or eliminating emissions,
    reducing toxicity or harmful chemicals, improving efficiency in packaging,
    or designing products or processes for reuse or recycling

--  The majority of sustainability actions undertaken to date appear to be
    limited to those necessary to meet regulatory requirements

    The study identified three major barriers to decisive corporate action: a lack of understanding of what sustainability is and what it means to an enterprise; difficulty modeling the business case; and flaws in execution, even after a plan has been developed. But the risks of failing to act decisively are growing, according to many of the thought leaders interviewed.

"I think that the world has reached a tipping point now," said Steve Fludder, vice president of ecomagination at General Electric, in an interview. "We're beyond the debates over whether [addressing sustainability] is something that needs to be done or not -- it's now mostly about how we do it."

Dierk Peters, former international marketing manager for Unilever, echoed the point that companies need to get focused and concrete in their action plans: "All the benefits of sustainability are only possible if you tackle the issues on the supply chain. If you don't, it's greenwashing."

While many companies are either moving slowly or struggling with execution, there are several noteworthy exceptions. The study profiles a small number of companies (including Nike, Better Place, and Rio Tinto) that have aggressively integrated a sustainability strategy into their businesses -- and that are reaping substantial rewards.

--  The five companies cited most often by survey respondents as "world
    class" in addressing sustainability were General Electric, Toyota, IBM,
    Royal Dutch Shell, and Wal-Mart.

--  The research indicated that once companies begin to pursue
    sustainability initiatives in earnest, they tend to unearth opportunities
    to reduce costs, create new revenue streams, and develop more innovative
    business models.

    "One of the most interesting findings was that the more you know about sustainability, the more it matters," noted Michael Hopkins, editor in chief of MIT SMR and a coauthor of the report. "Executives who have been thinking and strategizing around the issues are much, much more likely to see the competitive advantage that a sustainability strategy can grant."

--  Sixty-eight percent of business leaders with sustainability expertise
    cited improved financial returns as a benefit from their organization's
    investments in sustainability initiatives, compared with only 32 percent of
    novices.

--  While novice practitioners thought of sustainability mostly in
    environmental and regulatory terms, with any benefits stemming chiefly from
    brand or image enhancement, practitioners with more knowledge tended to
    consider the economic, social, and even political impacts of sustainability-
    related changes in the business landscape.

    To help companies mobilize around sustainability, the authors offer a diagnostic tool that executives can use to assess their company's sustainability progress from a managerial perspective. This "sustainability audit" is meant to help organizations gauge the extent to which they have framed a sustainability agenda, developed a business case for it, and executed their strategy.

SOURCES; MIT Sloan Management Review; Boston Consulting Group