Sunday, January 29, 2012

How Relevant is Sustainability to Business Executives?

There is no shortage of studies on the growing prevalence of sustainability in business. Below are some of the results from the more powerful ones:

Results from an Accenture study conducted for the UN Global Compact on the importance of sustainability found that 96 percent of CEOs surveyed thought that sustainability issues should be fully integrated into the strategy and operations of a company – up from 72 percent in 2007. Even CFOs, those typically more resistant to sustainability due to pressure of financial market judgments, have shown signs of acceptance. A study of 175 CFOs and other senior executives conducted in 2008 by CFO Research Services found that more than half believed that their companies’ sustainability programs will very likely or somewhat likely increase revenue, cut operating costs, improve employee retention and improve investor returns and shareholder value. They tended to cite reduced risk (78 percent), enhanced brand and reputation (77 percent), customer retention (72 percent) and improved employee health and productivity (68 percent) as the more popular opportunities.

In terms of around sustainability, it appears that regulatory compliance is most important for 61 percent of respondents while improving energy efficiency, reducing greenhouse gas emissions (47 percent) and reducing the environmental impact of operations (45 percent) – those priorities associated with being less unsustainable – came in second.

Some of the greatest challenges identified in these studies included the following:

- The inability to measure the effects of sustainability on shareholder value (46 percent of respondents)
- Inability to document the effects on finical performance (37 percent)
- Lack of standard decision-making frameworks that consider environmental factors

In a study conducted by the Network for Business and Sustainability that asked Canadian managers to define the sustainability challenges in 2012, the following were identified:

- How to redefine the traditional business case to include sustainability
- How can sustainability drive innovation within companies?
- How can companies mobilize citizens to take more sustainable actions?
- How to build sustainability into corporate budgeting and planning
- How to continually green the firm in tough economic times
- How can businesses attract and retain employees through sustainability?
- What are the best (and worst) practices in sustainability reporting?
- How can businesses effectively engage with NGOs on social and environmental issues?

Interestingly, one of the least significant challenges was organizational resistance to sustainability.

One observation from these studies is that while business is increasingly recognize that sustainability is here to stay, their response to the trend is highly incremental. As mentioned, the objective of executives appears to be to understand how to fit society and the environment into the business model rather than the other way around. Put another way, the business ideology is the starting point rather than the laws of nature or the fundamental values of society (e.g. democracy, freedom, equity, inclusion, justice), with which business is forced to align. This is the sort of radical leadership that does not come out of these studies…not yet anyways.

1 comment:

  1. Thank you for sharing this post. I found it very interesting and informative. My company just hired one of the top executive recruiting firms and they asked us to put together a list of desirable traits. This helped alot, thank you!

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