The majority of managers who say that their company’s sustainability activities have added to profits also say that sustainability has led to business model change.
What connects corporate sustainability with business profits? According to our 2012 global executive survey on sustainability, an important factor is business model innovation. Managers who say that their company’s sustainability activities have added to the company’s profits are more than twice as likely to say that sustainability has caused their organization to change their business model than not. (See “The Importance of Business Model Innovation.”)
The sustainability story at Greif, a leading manufacturer of industrial packaging, illustrates the importance of business model innovation and several other key findings from our survey. Scott Griffin is chief sustainability officer at Greif, a 135-year-old global industrial packaging company headquartered in Columbus, Ohio that had net sales of $4.2 billion in 2011. Griffin says there are four keys to Greif’s sustainability agenda, which has become central to the company’s overall business operations and strategy. One is top management attention to sustainability. “One reason sustainability works here at Greif is high-level, strong executive commitment,” says Griffin. Unlike many chief sustainability officers, Griffin reports directly to the CEO and is a member of the company’s executive strategy team.
Another key to Greif’s approach to sustainability is collaboration. In the past three years, Greif has collaborated more with customers and nongovernmental organizations because of sustainability-related issues. These collaborations have helped the company not only establish sustainability-related goals, such as reductions in greenhouse gas emissions, but have also provided new opportunities for customer engagement and the development of new corporate capabilities.
The Leading Question
Do companies who change their business model profit from sustainability?
- Having a business case bolsters the success of business model change.
- Changing particular business model elements can have a significant effect.
- Collaboration with external stakeholders can be beneficial to sustainability efforts.
Collaboration with customers ties into the third element of Greif’s sustainability program: business model innovation. For instance, Greif worked with customers to analyze the life cycle of several of its products. The collaboration identified new business opportunities connected with reconditioning and extending the life of a major product line, steel and plastic drums. Greif now owns the largest global industrial packaging reconditioner, EarthMinded Life Cycle Services.
New internal organizational structures are the fourth key to Greif’s sustainability agenda.