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August 23, 2012 Sofus Midtgaard

Beyond CSR: Sustainability is core business

Beyond CSR: Sustainability is core business

The sustainability landscape is changing these years. From being about compliance and branding, the global resource crisis now places sustainability, resource efficiency and recycling at the hart of business strategy.

From being an appendix handled by Corporate Communication or the CSR department sustainability now makes it way into Strategy, Innovation and Operations.

More and more companies recognize that the world is changing. According to a CEO survey by UN Global Compact & Accenture 93% of CEOs believe that sustainability will be critical for the future success of their companies.

“93% of CEOs believe that sustainability issues will be critical to the future success of their business.”

CEO Survey, UN Global Compact & Accenture, 2010

Several big companies like Interface, Nike and Genan are frontrunners in recognizing that sustainability is critical for the future success of their companies. Instead of seeing sustainability as a cost or compliance issues they put sustainability at the core of innovation and business development.

Beyond CSR

From being about branding, triple bottom line and investing in the future we need to get move on. We need to move beyond the half-hearted CSR-initiatives and place sustainability where it belongs – at the heart of strategy, innovation and execution.

“From 1980 to 2009, the global middle class grew by around 700 million people, to 1.8 billion, from roughly 1.1 billion. Over the next 20 years, it is likely to grow by an additional 3 billion, to nearly 5 billion people.”

McKinsey Quartly, 2012

The radical growth of emerging markets and the rise of a new middle class in India, China, Africa and South America raises the bar for sustainable business development. Nothing less than a resource revolution is needed!

European and Scandinavian Governments and Companies have in many ways been frontrunners in sustainable business development. But this position is threatened by a new awakening among governments and company CEOs in emerging markets.

Importance of Sustainability CEO

It’s time for action if European governments and companies shall keep up with emerging markets in sustainable business development.

“Normally when you continue business as usual it will cost you nothing. This is not the case here. It will cost us a lot.”

Connie Hedegaard, Commissioner Climate Action, Rebuild21 interview, 2011

 

The good news: Sustainability is good for profits

For many years business professionals and researchers have debated the link between sustainability and profitability.

Historic studies varies between: studies that establish clear positive link between sustainability and profit, to studies that conclude their is no significant link, to studies that conclude that sustainability has a negative effect on profits. The various result during the years may arise from difference regarding the time the study was conducted, the method and parameters used and different samples of companies and industries in the studies.

In one of the biggest and most recent studies analysing 180 companies, researchers from Harvard Business School established a clear positive link between sustainability and financial performance over the long term.

“Sustainability oriented companies “significantly outperform their counterparts over the long term, both in terms of stock market and accounting performance”

Eccles, Ioannou, Serafeim, May 9th 2012, Harvard Business School

Return on Sustainability

Source: Harvard Business School 2012

This new reality is influencing the financial and investor community now integrating sustainability as a key element of their screening process of when it comes to potential long term investments.

“The financial community is increasingly looking at companies and rewarding those that think smartly about their use of resources.”

Paul Polman, Unilever

Making it happen

While many CEO’s recognize the critical business importance of sustainability making it happen is more complex.

“49% of CEOs cite complexity of implementation across functions as the most significant barrier to implementing an integrated, company-wide approach to sustainability. Competing strategic priorities is second with 48%.”

CEO Survey, UN Global Compact & Accenture, 2010

As mentioned Companies like Interface, Nike and Genan are showing the way with a more integrated approach to sustainability.

Since 1994, Interface has challenged itself to become a truly sustainable company, demanding measurable achievements in their actions. Their main focuses for change are Footprint Reduction, Product Innovation and Culture Change.

“Sustainability is all about a set of whole new design principles. It fundamentally requires a life cycle approach. Since 1996 we have saved 440 mill. $ on waste savings alone and breaking the dependency on oil has huge economic benefits. “

Nadine Gudz, Head of Sustainability, Interface, Rebuild21, 2012.

 

Need for inspiration, tools and collaboration

But progress on industry level requires deep collaboration across companies and supply chains:

“We have learned over the years that our impacts, both environmental and social, create a complex set of challenges that cannot be solved by one company on its own. To that end we are accelerating the transparency of our data, knowledge sharing and tools and encouraging deep collaboration across the system in which we operate.

Hannah Jones, VP Sustainable Business & Innovation, NIKE, Inc. 2012

What is clearly needed is: inspiration, tools and support on how to integrate sustainability in the core values, strategy, business processes and scorecards of companies.

During the next year Rebuild21 and a number of industry partners will start a journey to identify, interview and share in debt ‘next practices’ from 21st century innovators in sustainability. We already have a network of sustainability innovators and cases on radical sustainability, resource efficiency and recycling from around the world but would love to hear from you:

Which companies have demonstrated new and more radical approaches to integrating sustainability in their strategy, innovation and product development?

Please contact Managing Partner, Sofus Midtgaard if your organisation could be interested in joining the project as industry partner or if you have ideas for 21st Century Sustainability Innovators that can inspire the rest of us. The study, cases and tools will be shared at The Rebuild21 Conference, The Leadership Academy , The Leadership Network and in a number of open cross-industry workshops and innovations-camps.

Rethinking Business for the 21st Century - want to join?