Bringing Discipline to your Sustainability Initiatives
Many companies have more sustainability initiatives than they can possibly manage. Here’s how to get them under control.
October 2015 | by David Delaney
Sustainability has become a part of life for many companies. For some, it’s a matter of meeting demands from customers seeking socially responsible goods and services. For others, it’s about addressing pressure from stakeholders—including investors—or pursuing their own corporate values. For still others, especially those in a resource-constrained environment, it’s a strategic imperative. Whatever the impetus, sustainability has become sufficiently pervasive that defining it and executing business programs, products, and practices with an eye to their environmental and social implications has become a demanding managerial exercise.
For some, sustainability has proved to be a valuable lens through which they have identified opportunities that they might have otherwise missed—to cut costs, reduce risk, and generate revenues.
Agree on Where to Focus
One of the biggest challenges companies face in sustainability is getting top-leadership attention. In a recent report for the United Nations Global Compact, 84 percent of the 1,000 global CEOs surveyed agreed that business “should lead efforts to define and deliver new goals on global priority issues,” but only a third said that “business is doing enough to address global sustainability challenges.”
In our observation, the problem at many companies is often one of focus; two-thirds of companies in a representative sample from the S&P 500 have more than 10 different sustainability focus topics; some have more than 30. That’s too many: it’s hard to imagine how a sustainability agenda with more than 10 focus areas can break through and get the necessary buy-in to be successful. And if top management doesn’t prioritize, then individual business units won’t either, and the result is fragmented, decentralized, and not necessarily aligned with one another or with overall top-level goals. That diminishes not only the social and environmental impact but also the economic value.
To develop a clear set of priorities, it is important to start by analyzing what matters most along the entire value chain, through internal analysis and consultations with stakeholders, including customers, regulators, and nongovernmental organizations (NGOs). This process should enable companies to identify the sustainability issues with the greatest long-term potential and thus to create a systematic agenda—not a laundry list of vague desirables.
The top reason that respondents gave for their company’s failure to capture the full value of sustainability is the lack of incentives to do so, whether positive or negative. According to the United Nations Global Compact, only 1 in 12 companies link executive remuneration to sustainability performance; 1 in 7 reward their suppliers for good sustainability performance. Among survey respondents, 1 in 3 named earnings pressure and lack of incentives as reasons for poor sustainability results; 1 in 4 named lack of key performance indicators and insufficient resources.
In this area, a number of companies exhibit good practices from which others learn. Some are strong when it comes to tracking data and reporting indicators, tracking carbon emissions and energy use, monitoring water use and waste, and recycling.