This is part 6 of 11 from “Sustainability: The ‘Embracers’ Seize Advantage,” a report on the findings of the 2010 Sustainability & Innovation Global Executive Study and Research Project.
External Forces Are Pushing Business Toward Adoption
The external pressures prompting the adoption of sustainability-driven management — pressures the embracers are already noting and acting on — are increasing. First, public policy is having an effect, as governments continue to work toward carbon reduction and other targets. While much legislation remains at a national or local level, the global nature of business means local rules can be far-reaching. In Europe, for example, legislation requiring electronics producers to recycle their products at the end of their lives does not only affect European companies. Any business wanting to sell into this market must be compliant.
Second, institutional investors and pension funds are starting to look at their investments through a sustainability lens. The Carbon Disclosure Project, which pushes companies to disclose their climate change-related risks, now represents investors with some $64 trillion under management. And access to finance could also be a consideration in the future. Some banks are introducing sustainability-related loans, and even private equity firms are starting to consider the sustainability risks and opportunities in potential acquisitions. Meanwhile, as requests for capital come under increasing scrutiny, sustainability is becoming a factor in lending decisions.
Third, employees are driving the agenda. As job candidates, they are holding potential employers under increasing scrutiny regarding their track records on sustainability. And while this does not necessarily trump pay and benefits, sustainability credentials are having an increasing influence on the decisions of job seekers.
Customers, as our survey has shown, are also proving a powerful force in shaping the new business landscape. P&G’s director of global sustainability Peter White first noticed this in 2006. “That was very much a point of change,” he says. “We had, for the first time, customers asking us for more sustainable products … that was the point at which we set a new sustainability strategy.” Walmart Canada has seen this consumer attention intensify among the business community, the general population, and its customer base.
Some additional strengthening megatrends such as the trends toward green and toward accountability — also underpin moves to incorporate sustainability into business operations. Increasing demand for green products such as energy efficient appliances, green mortgages and hybrid vehicles is shaping companies’ development of new products and services, as is demand for health and wellness and organic products. And the new era of accountability means measurement and reporting of companies’ environmental and social impact will take on greater prominence.
Cautious Adopters Are Aiming to Catch Up
If the embracers already know much of this, so, too, do rising numbers of cautious adopters. Two survey findings suggest that the cautious adopters have begun to recognize that where the embracers are is where the world is headed, and that the embracers’ behaviors offer a provisional blueprint for how management practice and corporate strategy will evolve.
One piece of evidence emerges in the answers to the question, “Is pursuing sustainability-related strategies necessary to be competitive?” Respondents in some industries answer “yes,” in many other industries, “no.” The variances are wide, ranging from 80% “yes” from respondents in the auto industry to just 29% in media and entertainment. However, when you add those executives who responded, “No, but will be in the future,” those gaps close across the board, particularly in the currently lagging industries, with 88% of respondents saying that sustainability-driven strategies will be necessary to be competitive — if not right now, then soon.
The second finding returns us to the question of planned increases in sustainability-related management attention and investment. The embracers are well in the lead here, with 87% saying they increased their spending in 2010 and 88% predicting that they will increase their spending in 2011.
However, significantly, the cautious adopters appear to have grasped how the sustainability agenda is changing and so are catching up with the embracers.
From 2010 to 2011, the number of cautious adopters planning to increase their sustainability spending jumps 24%, while the embracer numbers, though high, remain flat. In 2010, 51% of cautious adopters said they had stepped up their sustainability investments compared with 63% who said they would show increases in 2011. The commitment of the cautious adopters is increasing at a far higher rate than that of the embracers.
What those trends indicate is that most companies — whether currently embracers or not — are looking toward a world where sustainability is becoming a mainstream, if not required, part of the business strategy. And those not already putting sustainability at the heart of their business are planning on doing so in the near term. Sears Canada’s manager of sustainable supply chains Katie Harper agrees with this analysis. “It seems that even people who aren’t really doing much of anything right now are getting the message that this is something they’re going to have to be thinking about,” she says. “This is just part of the way things are going to happen now.”