Corporate Sustainability More Well-Rounded, but Still Ad-Hoc, Survey Finds

by | Oct 24, 2011

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Most companies are making sustainability integral to their strategy, but still struggle to integrate it into their supply chain and budget, according to the sixth annual McKinsey Global Survey.

The survey of 3,203 executives, from a range of regions, industries, company sizes and functional specialties, found a more well-rounded understanding of sustainability than in previous surveys. Cutting costs is now companies’ top reason for addressing sustainability, bumping corporate reputation down to second place. New growth opportunities have also jumped in popularity as a reason for sustainability initiatives.

McKinsey found that mission and values are the most common business area in which companies have integrated sustainability, followed by external communications. But companies are still not doing much to integrate sustainability into their internal communications or employee engagement, the consultants said.

And most companies’ approach to sustainability is still too ad-hoc, according to Sheila Bonini, a consultant in McKinsey’s Silicon Valley office, and Stephan Görner, a director in the Sydney office. They say most companies’ approach still focuses on launching individual initiatives to enhance their reputation, comply with regulations or deal with “emergencies,” instead of treating sustainability as an issue that directly affects business results.

Bonini and Görner said that more businesses need to take a long-term view of sustainability and use it to drive returns on capital, growth and risk management.

The survey found that sustainability has maintained about the same importance on CEOs’ agendas over time, and about the same share of respondents as last year say they have formal programs in place to address it.

McKinsey identified a group of its respondents as “sustainability leaders.” It defined these as executives who say sustainability is a top-three priority on their CEOs’ agenda; that it is embedded in their business practices; that their companies have a formal sustainability program; and that their companies manage sustainability very or extremely effectively.

The survey found that these companies were much more likely to integrate sustainability into strategic planning (94 percent of leaders, versus 53 percent of all other respondents), more likely to commit R&D resources to sustainable products and more likely to say that sustainability is important for attracting and retaining employees.

Companies in energy, oil and gas, mining and transportation reported taking a more active approach, probably because of the regulations and natural resource constraints they face, and they were over-represented among the “leaders,” McKinsey found. The leaders group had relatively few respondents from finance, retail, law and professional services.

Compared to 2010, larger shares of executives said sustainability programs make a positive contribution to their companies’ short- and long-term value.

But McKinsey said the relationship between sustainability and value is still unclear in executives’ minds, with about a third of respondents saying they don’t know how much sustainability initiatives add to shareholder value at their companies.

Last week a report by Two Tomorrows said that some companies are making sustainability-related changes without a real sense of direction.

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