Where Sustainability Lives: A Path to Integration and Innovation

July 12, 2009

Kathee Rebernak
Chief Executive Officer
Framework:CR

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The recession seems to have spurred rather than squelched interest in sustainability. Ongoing economic pressure has companies, especially those serving consumers, searching for new ways to build trust and distinguish themselves. And sustainable business practices are increasingly seen as a path to competitive advantage. So how can companies do more with less and still gain recognition for their efforts?

For starters, they can take a good, hard look at where the sustainability function sits within the organization.

Organizational structure matters

We recently conducted a study (registration required) that explores the relationship between sustainability organizational structure and external recognition for performance. We surveyed Fortune 500 companies to determine 1) the title of the position responsible for sustainability, 2) in what department it resides, 3) how close it is to the CEO, and 4) whether and how often it reports to the board. We then looked at whether the respondents eligible for six recognition programs-including the Carbon Disclosure Project’s Leadership Index and Fortune’s list of 100 Best Companies to Work For-appeared on any of those lists.

The results show that sustainability organizational structure correlates directly to recognition for performance.

Specifically, companies that received more recognition for sustainability performance were also those whose sustainability management position sat higher within the organization and reported frequently to the board.

chart-2-board-reporting-freuqency

An indicator of integration

While these characteristics show stronger commitment to sustainability, they are also leading indicators of sustainability integration. And sustainability practitioners and academics increasingly recognize that integration of sustainability principles and practices, rather than discrete initiatives, is what generates real business value.

Integration is the antithesis of siloing, that tendency of functional areas in companies, larger ones in particular, to focus on their own areas without communication or collaboration with members of other departments and with little consideration of the context in which they operate (and isn’t sustainability all about context?).

In contrast to siloing, which can inhibit innovation and heighten risk, integration broadens viewpoints by increasing “interfunctional” communication and collaboration, lowers risk, and opens people to opportunities.

In other words, integration fosters innovation. Supporting this view is a November 2008 Harvard Business Review article (subscription required) holding that successful innovation requires coordination of efforts-integration-across the organization. Authors James I. Cash, Jr.; Michael J. Earl; and Robert Morison define integration as “making the multiple units, functions, and sites of large organizations work together to increase capacity, improve performance, lower cost structure, and discover opportunities for improvement that don’t appear until you look across functions.”

While the article’s subject is enterprise IT, the authors may as well be referring to sustainability.

Yet despite strides in sustainability over the past decade, integration has yet to enter the consciousness of many companies and remains an elusive ideal even to those who see its value. Many still see sustainability itself as a squishy concept, incapable of being defined or neatly packaged, its value impossible to quantify.

Absent an executive mandate, layering sustainability considerations over everyday business decisions is just too complex, fraught, and evolving to bother with. This is exactly why companies should elevate responsibility for managing sustainability.

Elevating the function serves several objectives. First, elevation improves the big-picture view and enables the person charged with responsibility for sustainability to reach and engage high-level managers. And elevating the function itself elevates, in the eyes of employees (critical to execution) and key external stakeholders (beneficial to brand value), the company’s commitment to sustainability.

What to do?

At relatively little cost, companies can begin to facilitation the integration process by establishing a working organizational structure to manage and integrate sustainability. One question management should ask is “What do we want to be known for?”

The answer will help them understand where the function should reside. Our research indicates that companies whose sustainability function lives in legal, corporate or public affairs, or a dedicated department tend to gain greater recognition for their performance. Perhaps that’s because those departments are involved in decision-making across functions and may be more keyed in to the concerns of stakeholders. Strategic planning and finance is also a good place from which to manage sustainability, as those responsibilities touch all areas of the business, and the position should report to both the CFO and the CEO.

Which brings me to a final and critical point, made by Cecily Joseph, Director of Sustainability at Symantec: “When a CEO drives and promotes the CR agenda, then all aspects of the business become engaged at an accelerated level.” I couldn’t agree more. It’s not enough to have “CEO support.” For the sustainability effort to drive business value, the CEO must be in the driver’s seat.

chart-1-levels-from-ceo

When?

With so many companies reorganizing and streamlining to cut costs, this may be a perfect time to realign your organizational structure with your commitment to sustainability. That step, together with a very public commitment from the CEO, will spur innovation and better position the company to capture opportunities that will accompany the eventual recovery.

Kathee Rebernak is founder and CEO of Framework:CR, which promotes and facilitates sustainability leadership among companies, emerging business leaders, and peers.

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Reader Comments

Fantastic research. There is clearly a relationship (statistically I would argue that levels 2 and 3 from the CEO are the same). But this certainly points to more research being valid in this area.

I liked your point on siloing and would love to see how integration correlates to each companies social media efforts.

I would think that those companies that achieve more rewards are also more “out there” in social media. Those organizations where the efforts are closer to the CEO may also have those that are lower down more empowered and encouraged to share the word via social platforms. Thus elevating awareness (and award exposure) of their efforts.

Thank you for the nice post.

Ener Hax | July 13th, 2009

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