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September 18, 2009

Only 30% of Firms Have a Business Case for Sustainability

A vast majority of corporate executives believe that sustainability-related issues are having or will soon have an impact on their businesses, but more than 70 percent of them say their companies have not developed a clear business case for addressing sustainability, according to a new study by MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG).

The study, The Business of Sustainability, is available in two publications: a detailed special report by MIT SMR and a summary report by BCG. These findings are based on a global survey of more than 1,500 corporate executives and more than 50 in-depth interviews with experts from a range of disciplines.

A key finding of the study indicates that there is a wide gap between intent and action when it comes to addressing corporate sustainability. While it’s clear that sustainability is having an increasingly significant impact on business, the majority of companies are not taking action to either exploit the opportunities or mitigate sustainability risks, according to researchers.

Although 92 percent of respondents said that they were trying to address the issue of sustainability, most said that their companies were either not taking bold action on sustainability or were falling short on execution.

The study also reveals that less than a third of survey respondents said that their companies have developed a clear business case for addressing sustainability and less than 45 percent said their organizations were pursuing basic sustainability strategies such as reducing or eliminating emissions, reducing toxicity or harmful chemicals, improving efficiency in packaging, or designing products or processes for reuse or recycling.

Another major finding indicates that the biggest drivers of corporate sustainability investments include government legislation, consumer concerns and employee interest in sustainability.

The researchers identified three major barriers to decisive corporate action: a lack of understanding of what sustainability is and what it means to an enterprise, difficulty modeling the business case, and flaws in execution, even after a plan has been developed.

But many thought leaders interviewed for the study believe that the risks of failing to act are growing, say the researchers.

The study finds that sixty-eight percent of executives with sustainability expertise cited improved financial returns as a benefit from their organization’s investments, compared with only 32 percent of novices. In addition, those executives with more knowledge also considered the economic, social, and even political impacts of sustainability-related changes in the business landscape, according to the report.

The study also includes a “sustainability audit” to help organizations gauge the extent and execution of their sustainability agendas.

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