MIT Sloan Management Review: Sustainability contributing to company profits

Through a global survey conducted by MIT Sloan Management Review and The Boston Consulting Group, we sought to determine where exactly sustainability sits on the management agendas of the more than 2,800 companies.  It turns out that it’s prominent: more than two-thirds of companies have placed sustainability permanently on their management agenda.

Our study also 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.

In our resulting report, which was released last week, we chose to focus on “Harvesters”—the 31% of companies that say that sustainability is contributing to their profits. These harvesters are not merely implementing individual initiatives such as lowering carbon emissions, reducing energy consumption, or investing in clean technologies; they are actually changing their operating frameworks and strategies.

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 created a business case for sustainability. They are also 50% more likely to have a CEO committed to sustainability, and twice as likely to have both a separate sustainability reporting process and a separate function for sustainability. Harvesters are also 50% more likely to have designated a person responsible for sustainability in each business unit and more than 2.5 times as likely to have appointed a chief sustainability officer.

Our 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. Harvesters also tend to collaborate more with customers and suppliers than other companies.

Edgar Blanco, a research director at the MIT Center for Transportation and Logistics, says that although companies may find the collaboration process challenging, it is essential: “If you’re going to focus your strategy on carbon reduction or environmental impact or social impact, you need to engage your suppliers. Without them, you cannot succeed.”

Some multinationals with complex global supply chains have already started this process. Wal-Mart, for example, asks suppliers to complete a Sustainability Supplier Assessment evaluation. Starbucks has hosted a coffee cup summit at MIT for several years, bringing together representatives from its value chain in addition to competitors in order to improve the life cycle value of disposable coffee cups.

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.

Further study of those companies profiting from sustainability 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.

To read the full report with case studies, please visit Sustainability Nears a Tipping Point:

David Kiron is Executive Editor, Innovation Hubs, for MIT Sloan Management Review

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