Shareholders, SEC, Suppliers All Help Drive Sustainability

Why do some businesses embrace sustainability-driven management more than others?

At Ford Motor Co., part of the push is coming from shareholders. In turn, Ford pushes some of its own suppliers.

“It’s important for companies to monitor, measure and manage their sustainability performance for their own purposes, but also because shareholders are increasingly asking them to do so,” wrote Abby Joseph Cohen, senior investment strategist and president of the Global Markets Institute at Goldman Sachs, in the Ford Motor Co. Sustainability Report 2009/10.

“One problem for investors interested in sustainability issues is that much of the publicly available information is not as useful as it could be,” Cohen continued. “Moreover, there is often little consistency or comparability in the data offered by different companies. A sustainability issue that may be extremely relevant for one industry may not matter at all for another. Although the US Securities and Exchange Commission recently mandated corporate disclosures related to climate change, full details on the specific nature and form of disclosures must still be decided.”

Ford’s John Viera, director of sustainability and environmental policies, said in an interview last fall that the company worked with its larger suppliers on CSR (corporate social responsibility) initiatives “because they have a lot of suppliers too, and therefore they can go ahead and cascade this information down that chain.”

Smaller suppliers, Viera says “didn’t necessarily have the resources to put these types of program in place,” so Ford shared its own Code of Basic Working Conditions and encouraged companies to adopt it or develop a similar one of their own. “They are able to take that and run with it quickly,” said Viera.

MIT Sloan Management Review’s recent sustainability survey found that companies that are most engaged with sustainability issues — what we call “embracers” — define sustainability broadly, especially when compared with so-called “cautious adopters.”

Our new Spring 2011 issue’s cover story, “The ‘Embracers’ Seize Advantage,” has highlights of our special report on sustainability and innovation. The full report is available online and as a pdf.