There is a growing trend for big companies to use sustainable concepts as core business drivers
For decades, many companies have typically responded to sustainability challenges by pursuing incremental operational improvements. But we are beginning to see an interesting new trend – businesses using sustainability as a tactic for long-term offense, rather than just short-term defence.
Despite the uncertain economic outlook, leading international companies across diverse sectors are investing heavily in sustainable products and services. Others are making cross-industry partnerships to develop next generation products such as ...view middle of the document...
) heighten the importance of sustainability practices that increase organisational resilience and ensure companies’ long-term competitiveness.
Adoption of Corporate Sustainability
Adoption of corporate sustainability varies significantly by industry. A new study by MIT Sloan Management Review (Knut Balagopal et al, “The Second Annual Sustainability & Innovation Survey”, Winter 2011) reports the highest levels of commitment to sustainability in heavily regulated industries (e.g., chemicals), brand-sensitive industries (consumer products), and resource-intensive manufacturing industries (commodities, industrial products).
Adoption rates are lower in service industries (finance, media/entertainment) where energy consumption, environmental protection, and related factors are less salient. But even in late-adopting industries, organisational commitment to sustainability is steadily rising, signaling widening acceptance of sustainability as a standard part of the repertoire of international corporate management.
Surveys of global executives also show important regional variations. European corporate managers report a greater commitment to sustainability than their U.S. counterparts, an unsurprising finding given stronger regulatory pressures in the European Union and the prevalence of “shareholder” models of corporate governance in continental Europe over American-style stakeholder capitalism.
The factors driving adoption of corporate sustainability also differ by region. Corporate executives in North America are less motivated by advisory boards, advocacy organisations, and NGOs than managers in Europe, Asia-Pacific, Australia/New Zealand, Africa/Middle East, and Latin America. But North American managers face increasing pressure to converge toward rest-of-world standards on sustainability, as weak growth in the domestic market induces U.S. companies to expand their global operations.
Recent survey research provides interesting findings on the role of ownership structure in corporate sustainability. A study by McKinsey Quarterly reported 74 percent of respondents from publicly owned companies were systematically integrating environmental and social factors in corporate decision making, against 63 percent of privately owned firms. (“McKinsey Global Survey Results: Valuing Corporate Social Responsibility”, 2009). The high rate of adoption by listed companies illustrates the increased sensitivity of managers to shareholder concerns over the impact of corporate conduct on equity values and corporate earnings.
Managers of private enterprises are not beholden to shareholder interests, and their adoption of sustainability practices eventually depends on the personal commitment of the founders/owners. But private companies are not wholly immune from external pressures to adopt sustainability programmes, particularly enterprises in global industries where environmental protection and brand equity are critical issues. In response to...