The business of sustainability

Many companies are actively integrating sustainability principles into their businesses

December 20, 2011
Sandy MacIsaac

Purchasingb2b November/December 2011 print edition

Many companies are actively integrating sustainability principles into their businesses, according to a recent McKinsey survey. And they’re doing it pursuing goals beyond concern for reputation. For example, the survey notes as motivation saving energy, developing green products and retaining and motivating employees—all of which help companies increase value through growth and return on capital. McKinsey’s survey shows how companies understand and manage sustainability. This year’s results show that, since last year, more executives say sustainability programs make a positive contribution to their companies’ value.

The survey explores why and how companies address sustainability and to what extent executives believe it affects their bottom lines now and over the next five years. Respondents report a more well-rounded understanding of sustainability and its expected benefits than in prior surveys. The survey says executives see benefits to corporate reputation. But they also expect other benefits in the areas of cutting costs and opportunities in new markets and products. Respondents in certain industries—energy, extractive industries and transportation—report their companies take a more active approach than other sectors.

The share of respondents saying their companies’ top reasons for addressing sustainability include improving operational efficiency and lowering costs jumped 14 percentage points since last year, to 33 percent. This concern for costs replaces corporate reputation as the most frequently chosen reason. At 32 percent, reputation is the second-most cited reason, followed by alignment with the company’s business goals, mission, or values (31 percent) and new growth opportunities (27 percent), which climbed 10 percentage points since last year.

Companies are also integrating sustainability across many processes, the survey reports. According to respondents, 57 percent say their companies have integrated sustainability into strategic planning. The most integrated area is mission and values, followed by external communications.

However, the least integrated areas are supply chain management and budgeting. But sustainability has stayed at about the same place on CEOs’ agendas, the survey says, and about the same share of respondents say they have formal programs to address it. The share of respondents saying their companies effectively manage sustainability has even shrunk somewhat.           b2b