Disconnect Between Corporate Sustainability Concerns & Actions

If renewable energy is going to truly rise to the fore and supersede fossil fuels in the world’s energy portfolio, corporations will need to be on board in their implementation. According to a recent MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG) report however, companies are already dragging their feet even thought they’re aware that things like environmental regulations and possible a renewable portfolio standard could one day soon effect their business.

The study, titled The Business of Sustainability was the result of global survey of more than 1,500 corporate executives and more than 50 in-depth interviews with experts from a range of disciplines such as energy science, civil engineering, management, and urban studies.

“What came across loud and clear is that sustainability is having an increasingly significant impact on business, and executives are placing it high on the corporate agenda,” remarked Maurice Berns, a BCG partner and a lead author of the report. “But we also found a wide gap between intent and action. Simply put, a majority of companies are not acting decisively to exploit the opportunities and mitigate the risks that sustainability presents. The findings should be a wake-up call to executives that if they want to make progress on sustainability, it’s time to get serious.”

Although almost all the executives in the survey (92 percent) said that they were trying to address the issue of sustainability, most said that their companies were either not taking bold action on sustainability or falling short on execution.

  • Less than a third of survey respondents said that their company has developed a clear business case for addressing sustainability.
  • Less than 45 percent said their organizations were pursuing basic sustainability strategies such as reducing or eliminating emissions, reducing toxicity or harmful chemicals, improving efficiency in packaging, or designing products or processes for reuse or recycling.
  • The majority of sustainability actions undertaken to date appear to be limited to those necessary to meet regulatory requirements.

The study identified three major barriers to decisive corporate action: a lack of understanding of what sustainability is and what it means to an enterprise; difficulty modeling the business case; and flaws in execution, even after a plan has been developed. But the risks of failing to act decisively are growing, according to many of the thought leaders interviewed.

“I think that the world has reached a tipping point now,” said Steve Fludder, vice president of ecomagination at General Electric, in an interview. “We’re beyond the debates over whether [addressing sustainability] is something that needs to be done or not—it’s now mostly about how we do it.”

While many companies are either moving slowly or struggling with execution, there are several noteworthy exceptions. The study profiles a small number of companies (including Nike, Better Place, and Rio Tinto) that have aggressively integrated a sustainability strategy into their businesses—and that are reaping substantial rewards.

  • The five companies cited most often by survey respondents as “world class” in addressing sustainability were General Electric, Toyota, IBM, Royal Dutch Shell, and Wal-Mart.
  • The research indicated that once companies begin to pursue sustainability initiatives in earnest, they tend to unearth opportunities to reduce costs, create new revenue streams, and develop more innovative business models.

To help companies mobilize around sustainability, the authors offer a diagnostic tool that executives can use to assess their company’s sustainability progress from a managerial perspective. This “sustainability audit” is meant to help organizations gauge the extent to which they have framed a sustainability agenda, developed a business case for it, and executed their strategy.

For more information on the report, click here.

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