Corporate Sustainability at a Crossroads

May 23, 2017
by: DAVID KIRON, GREGORY UNRUH, NINA KRUSCHWITZ, MARTIN REEVES, HOLGER RUBEL, ALEXANDER MEYER ZUM FELDE

In the final report of our 8-year study of how corporations address sustainability, MIT Sloan Management Review and The Boston Consulting Group examine the crossroads at which sustainability now finds itself. Despite sociopolitical upheaval that threatens to reverse key gains, our research has shown that companies can develop workable — and profitable — sustainability strategies to reduce their impact on the global environment by incorporating 8 key lessons.

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MIT Sloan Management Review and The Boston Consulting Group have been tracking corporate sustainability for the past eight years, surveying tens of thousands of managers and interviewing more than 150 executives and thought leaders, while producing eight annual reports and numerous blogs and articles. MIT SMR and BCG joined forces to increase knowledge about business adoption of sustainable practices and to support the integration of sustainability into business strategy. (See Appendix for summaries of the reports.)

Despite significant progress, corporate sustainability has arrived at a crossroads. In one direction, corporate leaders in sustainability remain a minority, and are unevenly distributed across geographies and industries. In the other direction, a handful of standout companies are demonstrating that sustainability can be a driver of innovation, efficiency, and lasting business value. Populist political movements around the world threaten to set back global diplomatic progress on issues like climate change and reverse recent regulatory trends. All of this complicates the calculus of corporate leaders and their sustainability strategies.

Key Lessons

Key Lesson #1: Set your sustainability vision and ambition: 90% of executives see sustainability as important, but only 60% of companies have a sustainability strategy.

Key Lesson #2: Focus on material issues:Companies that focus on material issues report up to 50% added profit from sustainability. Those that don’t focus on their material issues struggle to add value from their sustainability activities.

Key Lesson #3: Set up the right organization to achieve your ambition:Building sustainability into business units doubles an organization’s chance of profiting from its sustainability activities.

Key Lesson #4: Explore business model innovation opportunities: Nearly 50% of companies have changed their business models as a result of sustainability opportunities.

Key Lesson #5: Develop a clear business case for sustainability: While 60% of companies have a sustainability strategy, only 25% have developed a clear business case for their sustainability efforts.

Key Lesson #6: Get the board of directors on board: 86% of respondents agreed that boards should play a strong role in their company’s sustainability efforts, but only 48% say their CEOs are engaged, and fewer (30%) agreed that their sustainability efforts had strong board-level oversight.

Key Lesson #7: Develop a compelling sustainability value-creation story for investors: 75% of executives in investment companies think sustainability performance should be considered in investment decisions, but only 60% of corporate executives think investors care about sustainability performance.

Key Lesson #8: Collaborate with a variety of stakeholders to drive strategic change: 90% of executives believe collaboration is essential to sustainability success, but only 47% say their companies collaborate strategically.

Fortunately, the path to sustainable value creation has become substantially clearer in the past eight years. Based on our multiyear research on corporate sustainability, we have identified eight evidence-based factors that drive sustainable business practices, regardless of industry or region:

  1. Articulate a practical sustainability vision and ambition that lays the foundation for new business practices.
  2. Identify and prioritize material issues to focus resources.
  3. Embed sustainability organizationally through cross-functional teams, clear targets, and key performance indicators (KPIs).
  4. Innovate on multiple dimensions of your business model.
  5. Develop a clear business case.
  6. Get the board of directors on board.
  7. Communicate a sustainability value-creation story to your shareholders.
  8. Collaborate with a variety of stakeholders to drive strategic change.

In this report, we draw upon our database of more than 60,000 survey respondents from companies around the world to assess the emergence of corporate sustainability across industries and elaborate the above eight critical insights that can help executives accelerate their company’s contribution to our common future.

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