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The Business of Sustainability: What It Means to Managers Now

Related Expertise Sustainability, Strategy

The Business of Sustainability

Imperatives, Advantages, and Actions

September 21, 2016 By Maurice Berns , Andrew Townend , Zayna Khayat , Balu Balagopal , Martin Reeves , Michael Hopkins , and Nina Kruschwitz

This report is published by The Boston Consulting Group and reflects our collaboration with MIT Sloan Management Review on the Sustainability Initiative, a joint undertaking with the objective of determining how challenges and opportunities presented by sustainability will transform management in the twenty-first century. It presents the findings from a global survey of more than 1,500 corporate executives and managers about their perspectives on the intersection of sustainability and business strategy, along with insights from more than 50 in-depth interviews with a broad mix of global thought leaders. There is also a diagnostic tool to help companies assess where they stand with their own sustainability initiatives. We hope to provide executives food for thought as they consider how—or whether—to take their sustainability efforts to the next level.

There is a strong consensus that sustainability is having—and will continue to have—a material impact on how companies think and act.

  • Ninety-two percent of survey respondents said that their company was addressing sustainability in some way.
  • There was also a strong consensus that the underlying drivers of sustainability are highly complex, interrelated, and lasting, and that the corporate sector will play a key role in solving the long-term global issues related to sustainability.

Sustainability is surviving the downturn.

  • Fewer than 25 percent of survey respondents said that their company had decreased its commitment to sustainability during the downturn.
  • Respondents in some segments, such as the automotive industry and the media and entertainment industry, reported an increased company commitment to sustainability relative to the average.

Although almost all the executives in the survey thought that sustainability would have an impact on their business and were trying to address this topic, the majority also said that their companies were not acting decisively to fully exploit the opportunities and mitigate the risks that sustainability presents.

  • The majority of sustainability actions undertaken to date appear to be limited to those necessary to meet regulatory requirements.
  • More than 70 percent of survey respondents said that their company has not developed a clear business case for sustainability.

A small number of companies, however, are acting aggressively on sustainability—and reaping substantial rewards.

  • 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.
  • The early movers’ approaches have several key characteristics in common: they incorporate a comprehensive set of data into a robust business case, which they then integrate throughout all relevant aspects of their operations to deliver measurable financial results.

Thought leaders and survey respondents with experience in sustainability interpreted sustainability concerns (and their management implications) far more broadly than did survey respondents lacking such experience. This understanding can open sometimes surprising opportunities for capturing advantage.

  • While sustainability’s novice practitioners thought of the topic mostly in environmental and regulatory terms, with any benefits stemming chiefly from brand or image enhancement, practitioners with more knowledge about sustainability expanded the definition for sustainability well outside the “green” silo. They tended to consider the economic, social, and even political impacts of sustainability-related changes in the business landscape. Simply put, they saw sustainability as an integral part of value creation.
  • Self-identified experts in sustainability believed more strongly in the importance of engaging with suppliers across the value chain. Sixty-two percent of these respondents considered it necessary to hold suppliers to specific sustainability criteria; only 25 percent of novices felt the same way.
  • There was a high correlation between the depth of a business leader’s experience with sustainability and the drivers and benefits that he or she perceived. For example, 68 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. This suggests that the more people know about sustainability, the more thoughtfully they evaluate it and the more opportunity they see in it—and the more they think it matters to how companies manage themselves and compete.

According to survey respondents, the biggest drivers of corporate sustainability investments—that is, the forces that are having the greatest impact on companies—are government legislation, consumer concerns, and employee interest in sustainability.

  • Government legislation was cited as the principal driver of sustainability efforts by nearly all the industries we analyzed—with the exception of agriculture, mining, and water companies, which cited concerns about environmental pollution, and companies in both the media and entertainment industry and the technology and telecommunications industry, which identified global political security as being of greatest concern.
  • Consumer concerns were viewed as a relatively more critical force in sustainability among companies based outside the United States and Europe.

Sustainability will become increasingly important to business strategy and management over time, and the risks of failing to act decisively are growing.

  • Our research indicates that companies need to develop a better understanding of the implications of sustainability for their business—and that the companies already doing so are seeing significant benefits.
  • Companies will need to develop new capabilities and characteristics, including the ability to operate on a systemwide basis and collaborate across internal and external boundaries; a culture that rewards and encourages long-term thinking; capabilities in the areas of activity measurement, process redesign, and financial modeling and reporting; and skills in engaging and communicating with external stakeholders.

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The Business of Sustainability
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