The Business of Sustainability

by: Maurice Berns, Andrew Townsend, Zany Khayat, Balu Balagopal, Martin Reeves, Michael Hopkins, and Nina Kruschwitz


Sustainability is garnering ever-greater public attention and debate. The subject ranks high on the legislative agendas of most governments; media coverage of the topic has proliferated; and sustainability issues are of increasing concern to humankind.

However, the business implications of sustainability merit greater scrutiny. Will sustainability change the competitive landscape and reshape the opportunities and threats that companies face? If so, how? How worried are executives and other stakeholders about the impact of sustainability efforts on the corporate bottom line? What, if anything, are companies doing now to capitalize on sustainability driven changes? And what strategies are they pursuing to position themselves competitively for the future?

To begin answering those questions, the MIT Sloan Management Review and knowledge partner The Boston Consulting Group, with sponsorship support from business analytics provider SAS, are collaborating on a project called the Sustainability Initiative. As part of that effort, we recently launched a global survey of more than 1,500 corporate executives and managers about their perspectives on the intersection of sustainability and business strategy. (We plan to make this an annual survey.) Prior to the survey, to form hypotheses and shape its questions, we conducted more than 50 in-depth interviews with a broad mix of global thought leaders. Our interviewees included executives whose companies are at the cutting edge of sustainability (including General Electric, Unilever, Nike, Royal Dutch Shell, and BP) and experts from a range of disciplines such as energy science, civil engineering, and management. The insights of these two groups yielded a fascinating glimpse of sustainability’s current position on the corporate agenda — and where the topic may be headed in the future.

This report presents high-level findings from those surveys and interviews and offers interpretation and analysis of the results, along with a diagnostic tool. We hope that it provides executives food for thought as they consider how they can take their sustainability efforts to the next level.

For more about this work in sustainability, including exclusive in-depth interviews and additional feature articles, please see the online exploration at MIT Sloan Management Review’s Sustainability Initiative website.

Executive Summary

There is a strong consensus that sustainability is having — and will continue to have — a material impact on how companies think and act.

  • More than 92 percent of survey respondents said that their company was addressing sustainability in some way.

About the Authors

Maurice Berns is a partner and managing director in the London office of The Boston Consulting Group.

Andrew Townend is a principal in the firm’s Dallas office.

Zayna Khayat is a principal in BCG’s Toronto office.

Balu Balagopal is a senior partner and managing director in the firm’s Houston office.

Martin Reeves is a senior partner and managing director in BCG’s New York office.

Michael Hopkins is the editor in chief of MIT Sloan Management Review.

Nina Kruschwitz is the sustainability editor of MIT Sloan Management Review.

Acknowledgments

Shai Agassi, founder and CEO, Better Place

Tom Albanese, CEO, Rio Tinto

Ray Anderson, founder and chairman, Interface

Roberto Bocca, senior director, head of Energy Industries, World Economic Forum; former director, Emerging Consumer Markets, BP Alternative Energy

Jason Clay, senior vice president, Market Transformation, World Wildlife Fund

Vivienne Cox, former executive vice president, BP; former CEO,BP Alternative Energy

John Ehrenfield, executive director, International Society for Industrial Ecology; former director, MIT Program on Technology, Business,
and Environment

John Elkington, founder and non-executive director, SustainAbility; founding partner and director, Volans Ventures

Alyssa Farrell, marketing manager for sustainability solutions,SAS

Steven Fludder, vice president, ecomagination, General Electric Company

Jay Forrester, Germeshausen Professor Emeritus of Management, System Dynamics Group, MIT Sloan School of Management

Hal Hamilton, codirector, Sustainable Food Laboratory

Stuart Hart, Samuel C. Johnson Chair in Sustainable Global Enterprise, Professor of Management, The Johnson School, Cornell University

Paul Hawken, author, environmentalist, and CEO, Biomimicry Ventures Group

Rebecca Henderson, Senator John Heinz Professor of Environmental Management, Harvard Business School

Howard Herzog, principal research engineer, MIT Laboratory for Energy and the Environment

John Hofmeister, founder and CEO, Citizens for Affordable Energy

Jeffrey Hollender, chief inspired protagonist and cofounder, Seventh Generation

Georges Kern, CEO, IWC (International Watch Company)

Judith Layzer, associate professor of environmental policy, Department of Urban Studies and Planning, Massachusetts Institute of Technology

Bernard Lietaer, author and academic chairman, ACCESS Foundation; fellow, Center for Sustainable Resource Development, University of California, Berkeley

Richard Locke, deputy dean and professor of entrepreneurship, MIT Sloan School of Management

Amory Lovins, cofounder, chairman, and chief scientist, Rocky Mountain Institute

L. Hunter Lovins, president and founder, Natural Capitalism Solutions

Thomas Malone, professor of management, MIT Sloan School of Management; founding director, MIT Center for Collective Intelligence

David Marks, Goulder professor of civil and environmental engineering and engineering systems, Massachusetts Institute of Technology

Lord Robert May, professor, Oxford University and Imperial College, London

William McDonough, founding partner, William McDonough & Partners

Tim Mohin, principal consultant, Environmental and Occupational Risk Management; former senior manager for supplier responsibility, Apple; former director, sustainable development, Intel

Adil Najam, professor, international relations and geography and the environment; director, Frederick S. Pardee Center for the Study of the Longer-Range Future, Boston University

Jacqueline Novogratz, founder and CEO, Acumen Fund

William O’Rourke, vice president, sustainability and environment, health, and safety; Alcoa

Chris Page, director of climate and energy strategy,Yahoo!

Rod Pearse, CEO and managing director, Boral Limited

Dierk Peters, director, World Wildlife Fund Sustainable Seafood
Initiative; former international marketing manager, Unilever

John Reilly, senior lecturer, Center for Energy and Environmental Policy Research, MIT Sloan School of Management

Dawn Rittenhouse, director of sustainable development, DuPont

Harriett Ritvo, professor of history, Massachusetts Institute of Technology

Walter Robb, copresident and CEO, Whole Foods Market

George Roth, principal research associate, MIT Sloan School of Management

Gwen Ruta, vice president of corporate partnerships, Environmental Defense Fund

John Sall, cofounder and executive vice president, SAS

Peter Schwartz, thought leader, Monitor Group; cofounder and chairman, Global Business Network

Jeff Seabright, vice president, environment and water resources, The Coca-Cola Company

Peter Senge, senior lecturer, organization studies, MIT Sloan School of Management; founding chair, Society for Organizational Learning

Yossi Sheffi, professor, Massachusetts Institute of Technology; director,
MIT Engineering Systems Division; director, MIT Center for Transportation and Logistics

Cameron Sinclair, executive director and cofounder, Architecture for Humanity

Sarah Slaughter, senior lecturer, strategy; MIT Sloan School of Management,
coordinator, Laboratory for Sustainable Business and Sloan Sustainability Initiative

John Sterman, Jay W. Forrester Professor of Management and
Engineering Systems, MIT Sloan School of Management; director, System Dynamics Group Laboratory for Sustainable Business

Joseph Sussman, JR East Professor of Civil and Environmental Engineering and Engineering Systems; Massachusetts Institute of Technology

Graeme Sweeney, executive vice president of future fuels and CO2, Royal Dutch Shell

Ziad Tassabehji, director, utilities and asset management, Masdar

Vijay Vaitheeswaran, correspondent, The Economist; coauthor, Zoom: The Global Race to Fuel the Car of the Future

Allen White, senior fellow and vice president, Tellus Institute

Darcy Winslow, former general manager, sustainable business opportunities, Nike; CEO and founder, Designs for a Sustainable World Collective

Methodology for the Sustainability Survey and Interviews

The first annual Business of Sustainability research project — a part of the Sustainability Initiative at https://sloanreview.mit.edu/sustainability — had three parts. First, there were a wide-ranging series of interviews with experts in widely varied disciplines at MIT (including civil engineering, energy science, management strategy, urban studies, and others) plus interviews of Boston Consulting Group experts. Second, we interviewed more than 50 thought leaders about the topic of sustainability. The interviewees included managers, C-level business executives, academics, and experts from NGOs, governmental organizations, advisory services firms, and think tanks.

Finally, informed by those interview sets, we developed a 20-question electronic survey drawing on hypotheses we jointly developed from our interviews with thought leaders in sustainability. The survey was available online throughout March and April 2009.

Survey Respondents

More than 2,000 respondents participated in the survey; they represented a broad mix of companies and organizations. (Exhibit 7: A Diverse Mix of Leaders Responded to the Sustainability Survey.) The data and analyses in this report reflect the 1,560 survey responses from business leaders at for-profit companies. The large number of survey responses allows for statistical significance across all of the major categories examined.

An additional 462 survey responses from nonprofit executives, academics, government officials, and others were analyzed separately. This analysis is available at MIT Sloan Management Review’s Sustainability Initiative website, https://sloanreview.mit.edu/big-ideas/sustainability.

References

1. Drivers include government legislation, pressure from consumers and customers, employee interest, pressure from society, the impact of ecological factors (for example, climate change, pollution, and the supply of resources such as food and water), and sociological factors (such as population growth, urbanization, and inequities in health and labor).

2. Intangible impacts include enhanced brand awareness and equity (which leads to customer loyalty and the ability to command a price premium), improved employee recruitment, retention and engagement, and lower risk premiums (which improve valuations and enable easier access to capital and insurance).

3. Stakeholders include consumers, business-to-business customers, competitors, regulators, nongovernmental organizations, society overall, financiers, lenders, and capital-market analysts.

4. Capabilities and tools include but are not limited to frameworks for developing the business case; measurement, tracking, and reporting tools; scenario-planning capabilities; technologies for product design and manufacturing; supply chain technologies; capabilities in partnering with stakeholders; and regulatory expertise.

Tags:

More Like This

Add a comment

You must to post a comment.

First time here? Sign up for a free account: Comment on articles and get access to many more articles.