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The Business Case for Corporate Sustainability Tools

Author: Reg Shiverick
March, 2013 Issue

There was a time when corporations treated sustainability as nothing more than the topic du jour of environmental activists, or an issue they recognized only because the law required it. But today’s corporate sustainable practices have undergone a remarkable shift. Now, sustainability is being integrated into the bottom-line of businesses. Leading global companies have paved the way for sustainable innovation. Investors and consumers are increasingly weighing green footprints in decision-making, and senior levels of management have realized the benefits.
 

Global leaders signal trend toward sustainability

One of the most easily identifiable heralds of the importance of sustainability in the corporate structure is the way influential multinationals have approached the subject. In the Carbon Disclosure Project’s (CDP) 2012 Global 500 Report, findings indicated that, not only were S&P companies making progress in taking sustainability into account, but they were doing so at a swift rate. The CDP designates a disclosure score to companies on a scale of 1 to 100, with 100 being the best. In the 2012 report, the average score had increased by 13 percent to 70 in just one year. Fifty-two percent of companies reported emission-reduction activities, compared to 35 percent in 2011. Seventy-three percent of respondents had also incorporated climate change into business strategy, 65 percent had done so in 2011.
The 2012 Sustainability Leadership Report by Brandlogic and CRD Analytics detailed the same trend in corporate sustainability. The study used a similar 100-point system and, of the 100 prominent global companies reviewed by the study, 93 had improved their sustainability scores. The gains led to a significant uptick in the mean sustainability scores: 51.7 in 2012, compared to 42.4 in 2011, a 9.3 point increase.

Consumers drive sustainability, demand results

While some companies do partake in sustainable initiatives of their own accord, consumers also have an influential place in the increasing attention paid to corporate social responsibility.
 
In a study by Cone Communications, researchers found that, not only do consumers factor in a company’s sustainable record when making a purchasing decision, they also want companies to effectively convey specific results of their dedication to sustainability. Eighty-six percent said they’d be more likely to trust a company that reports corporate social responsibility results, and 82 percent said they’re more likely to buy a product that clearly demonstrates those results. Consumers also are willing to pay between 15 and 20 percent morefor retail products from companies that support sustainable practices, according to University of Missouri researchers.
 

Sustainability a key consideration for investors

Engaging in and effectively communicating sustainable practices also presents businesses with a wealth of opportunities for establishing credibility. Financial institutions and investors have increasingly trained their sights on sustainability, and the result has been the creation of stock indexes specifically for leading sustainable companies. Both the Dow Jones and the NASDAQ maintain and review a sustainable index.
Other studies point to the notion that it isn’t just a trend that investors are focused on sustainability. Instead, it’s a pattern of financial behavior that will only continue to grow.
In a 2012 survey by Ernst & Young, 66 percent of executives polled said they saw an increased amount of sustainability-related inquiries from investors in the past year. Seventy percent of those inquiries focused on energy management and greenhouse gas emissions, and more than half posed questions about sustainability reporting. The survey also asked investors and shareholders what proposals they made to their company’s board in 2011: 40 percent of proposals carried an environmental or social intent, up from 30 percent in 2010.
 
PricewaterhouseCoopers also conducted a study on sustainable investing. It found that socially responsible investing (SRI) has undergone significant growth in the last 15 years, particularly since 2008, and that nearly $1 out of every $8 invested is involved in sustainable and responsible practices.
 

C-level executives also take notice

In the end, the critical decisions on pursuing sustainable initiatives rest with upper-level executives, many of whom have recognized the benefits. In a survey by the United Nations Global Compact of 766 CEOs worldwide, 93 percent said sustainability issues will be a critical factor to the future success of their business. Ninety-one percent said they’d employ various sustainable technologies like renewable energies in the next five years; 96 percent said sustainability should be fully integrated in business strategy; and 88 percent said sustainability should be integrated into the supply chain.
 
Environmental, health and safety (EHS) managers who look to upper management for resources to implement sustainable practices may also have another ally in the boardroom, as a Deloitte survey of 250 CFOs in 14 countries found two-thirds of CFO respondents said they’re involved in driving sustainability strategies and more than 50 percent said their efforts had increased in the past year. Additionally, 74 percent said sustainability had a “meaningful impact” on financial reporting, while 54 percent said it impacted tax matters.
 

A foundation of environmental compliance

The very nature of how companies operate has shifted with the evolution of sustainability into a basic tenet of business. What’s clear is that sustainability matters. But what may not be so clear for businesses just entering the sustainability fray is how they can achieve sustainable practices. The answer begins with a solid foundation of environmental compliance.
In “Ensuring Environmental Compliance: Trends and Good Practices,” the Organization for Economic Co-operation and Development (OECD) wrote that, if businesses and countries want to accomplish their various sustainability objectives, they need to treat environmental compliance as the gateway to success.
 
Success integrating sustainability programs relies on the ability of a business to comply with regulations. Using tools for sustainability measurement and reporting is easy, but implementation of EHS compliance through proper tools and culture change is a more potent means of achieving success. Companies should prioritize investing in tools that will ensure compliance and establish a solid foundation for world-class sustainable performance.
 
 
This article is an excerpt from the white paper “The Business Case for Corporate Sustainability Tools.”
 
Reg Shiverick, president of Dakota Software, is an expert on the structure and role of environmental, health and safety (EHS) programs. He’s also closely associated with the Student Conservation Association, a nationwide force of high school and college-age volunteers committed to protecting and preserving the environment.

 

 

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