There was a time when sustainable, in the business sense of the word, described companies with the ability to innovate, improve upon existing product lines and broaden market share as a consequence … in simple terms, survive and grow. Others may have regarded sustainable as the business’ ability to vanquish various fiscal challenges, such as economic downturns and the like. Today, sustainable has new meaning and entirely different nuances.
Today, when corporate CEOs speak of sustainable, they mean eco-friendly business practices; practices that result in conservation of resources via recycling, process improvements, green technologies and more frequently, a combination of all three. In short, sustainable firms are generating a positive environmental impact. As a result, corporations are “going green” en masse and those that came early to the party are finally beginning to reap financial rewards in addition to the approbation of consumers and shareholders alike.
Corporate sustainability is referenced differently by various CEOs, running the gamut from sustainability to corporate social responsibility, to corporate citizenship and even triple bottom line (a reference to profits, people and planet). However, they all point toward the management trend in business to assume a new level of social responsibility toward society and shareholders.
Chief executives, once concerned only with profits for shareholders, must now embrace a concern for all people and for the earth itself.
Clearly, business has moved beyond the day when placing a few recycling bins around the facility and converting a few light bulbs to energy efficient fluorescents and declaring itself green are distant memories. But what are the trends for corporate sustainability in the present?
The Six Trends
1. Like ripples emanating from a stone tossed into a clear pool, CEOs are embracing the responsibilities of corporate sustainability and taking the lead in their respective firms by setting a tone for greater awareness.
In a survey conducted by Ernst & Young in the late fall of 2012 with members of the Greenbiz Intelligence Panel, it was revealed that 62% of those surveyed said the companies they represent, actively report the progress of sustainability goals to the public.
Fully 59% reported that progress measurements were routinely reported to the company’s board of directors, signaling a broader acceptance of the sustainable business model than in prior years.
2. Governments have demonstrated an apparent satisfaction or lack of interest in the manner in which corporations are approaching sustainability issues and seem to be content with remaining on the sidelines.
The absence of government involvement is a mixed blessing. On the positive side of the equation, corporations have been able to chart their own path with almost no interference. However, on the negative side, businesses have been slower to innovate press forward an agenda because of this lack of government direction largely because of the uncertainties regarding what, if any action, the government may take in the future.
3. Sustainability concerns are expanding to encompass the concepts of the heightened risk of shortages and the challenges associated with the geographical relevance of natural resources.
Corporate leaders are increasingly aware that multiple factors threaten the flow of natural resources to production facilities. It is no longer a simple case of resources being used up. The realization has dawned that multiple factors can affect access to critical resources. Geo-politics, social issues and the specter of newly emerging economies are just a few of the new realities to that must be considered … never mind climate change, freshwater shortages as the world’s population explodes and disruptions of the supply chain due to weather extremes.
4. As a result, corporations are beginning to recognize that their risk response is insufficient, relative to the scale of the challenges being confronted.
The Ernst and Young’s survey suggests that fully 79% of those surveyed believe their organization has integrated sustainability risk management into the overall corporate risk management framework.
5. Corporate reporting has been slow to conform to the needs of companies pursuing the aforementioned triple bottom line.
The momentum of the corporate sustainability business model has left those responsible for accurate and timely reporting of the companies’ progress toward sustainability goals in the dust.
While the Ernst & Young survey reports that more than 5000 sustainability related reports are produced globally on an annual basis, the lack conformity and target far too many special interests groups and selected stakeholders.
6. Shareholders and investors of all stripes are exhibiting increased interest in sustainability goals as evidenced by increased levels of inquiry on the subject.
Some large corporations are receiving upwards of 300 information requests annually from shareholders, investors, media, activist groups and a host of others, seeking information regarding various aspects of corporate sustainability.
This is irrefutable evidence that the public has developed an unprecedented interest in the activities, results and direction of those businesses with a triple bottom line.
Business may best address these points by developing a common vocabulary on the subject; building multi-disciplinary teams; establish uniform reporting procedures for sustainability, risk and investor relations; begin modeling risk scenarios for water shortages, climate change and population growth and monitor shareholder resolutions and NGO activity to reveal market pressures in the first instance and government intervention in the second.