Few companies are born with a broad-based commitment to sustainability. To develop one, companies need leadership commitment, an ability to engage with multiple stakeholders along the value chain, widespread employee engagement and disciplined mechanisms for execution.
Corporate sustainability has captured the attention of much of the world over the last few years. Trends suggest that the public is no longer satisfied with corporations that focus solely on short-term profit maximization. A recent study that compares companies that adopted environmental and social policies with companies that didn’t, authored by two of the authors of this article and another colleague, provides empirical support for this view. “High sustainability” companies significantly outperformed their counterparts over an 18-year period in terms of both stock market and accounting criteria, such as return on assets and return on equity. They also exhibited lower performance volatility.
Currently, organizations that exhibit a broad-based commitment to sustainability on the basis of their original corporate DNA are few and far between. For most companies, becoming sustainable involves a conscious and continuing effort to build long-term value for shareholders by contributing to a sustainable society. The authors studied the organizational models of companies that they refer to as “sustainable” by comparing them with companies that they call “traditional.” They focused on two primary questions: (1) How do sustainable companies create the conditions that embed sustainability in the company’s strategy and operations, and (2) What are the specific elements of sustainable companies’ cultures that differentiate them from those of traditional companies?
The authors have developed an identity and cultural model for how to create a sustainable company. While the model is straightforward, implementation is by no means easy, because it is grounded in largescale change–something that few companies seek out or do well. The first stage involves reframing the company’s identity through leadership commitment and external engagement. The second stage involves codifying the new identity through employee engagement and mechanisms of execution. Both are ongoing processes. Once the second stage begins, the two stages reinforce each other. Employee engagement enables even more sophisticated external engagement, since a broader range of employees will be able to effectively engage with outside stakeholders. Mechanisms of execution bind leadership commitment, since these organizational-level attributes continue from one generation of leaders to the next. Similarly, leadership commitment provides a strong motivating force for employee engagement, since employees know that their leaders care about what they are doing. External engagement strengthens the company’s mechanisms of execution, since stakeholder pressure challenges the company to constantly improve its quality. The article draws on examples at companies including Dow Chemical, PepsiCo, Natura and Toyota.
8 Comments On: How to Become a Sustainable Company
I am one of the authors of this study. We are eager to hear feedback from others.
As a consultant of a small company(28 employees) in Italy, close by Salerno, almost three years ago, I completely change the business model of this cardboard packaging, serving mainly the food district in the area.
The amazing fact is that we applied a new strategic wiew a new mission and a new way of doing business.
and that is like the topics that you have analyzed in your article.
Shortly, now we have a sustainable packaging division, a design and furniture branch and a consulting sector for sustainable application.
All this while ther’s around one of the most dangerouse crisis in the era of capitalism.
It has been a fantastic story, that confirm Ted Levitt’s great insight: there are no crises, but good or bad management.
Vincent D’Avanzo edav@libero.it
So many things resonate in this research with what we doing at TELUS International. As a global contact center provider, corporate social responsibility (CSR) is especially important in our business for two key reasons. First, our contact center clients are looking to do business with a partner that has shared values. And if one of those shared values is an awareness and a responsibility to give back – it can play a huge role in developing a long-term, sustainable partnership. Second, we believe CSR is directly linked to helping us do better for our customers. In our business, there’s a simple formula: happy agents = happy customers. If you’re supporting a culture for your employees to make a difference and give back to their communities, it has many benefits including enhanced engagement and agent tenure. This tenure translates into an enhanced competency to better serve customers.
Jennifer Bach
At R.V. Institute of Management in Bangalore , we have taken this text and Research for classroom discussion among student of II Semester MBA and volunteers of RVIM Centre for Social Responsibility.We hope this effort will inculcate a positive inclination towards practice and commitment to sustainability.
A.Chandran
Faculty in General Management
Coordinator -RVIM Centre for Social Responsibility
R.V.Institute of Management
Bangalore-INDIA
Glad to hear that the article will be discussed by graduate students!
Let us know about significant questions and comments. We have a great deal of data and we might be able to answer or at least address questions that come up.
this is one of the must be read topic before we take a business ethic clas at this end of august in MBA ITB Jakarta. thanks in advance.
Jesmin,
We are pleased that you are finding the article to be useful. We are about to start on our third study. This time we are including several large global companies that would like to administer the SCALA to a broad cross-section of their companies. We believe that this “deep dive” will provide invaluable new insights in testing our model.
Kathy
First and foremost, thank you. This is a great article.
Earlier this year my agency created the business plan and strategy for GoGreenHealthcare an ecohealthcare website. The site provides best practices to the healthcare community and the pharmaceutical industry on sustainability in the healthcare arena. Sustainability provides tremendous opportunities for companies to build equity and reduce waste. A great resource that cites numerous corporate case studies is “The Way Out…” by Hunter Lovins, Available on Amazon: http://www.amazon.com/The-Way-Out-Kick-starting-Capitalism/dp/0809034697 If you are vested in sustainability it’s a must read. I live in New Jersey and the devastation of Sandy it is quite evident that climate change is not a myth. We have an obligation to be stewards of our fragile environment.