We recently completed over thirty interviews with senior sustainability executives and asked about the central rationale for sustainability at their companies. Some executives cite existential threats such as dwindling supplies of key natural resources as the driver of their company’s commitment to sustainability. Others point to demands from their customers. Some invoke the expectations of their employees; they believe that a reputation for doing business sustainably will aid in employee recruitment, retention and engagement. Some say sustainability is the path to differentiation in a commoditized market. Other motivations we heard from sustainability executives include:
- Doing the right thing
- Managing our brand reputation
- Mitigating regulatory, supply chain or NGO action risks
- Seizing new opportunities
- Making us a better company
How companies articulate the fundamental purpose of their sustainability initiatives is as varied as the industries they operate in, the customers they serve, their heritage, and the vision and commitment of their most senior leadership.
All companies are in business to make money. Beyond that, corporate purpose begins to diverge significantly. Stakeholders have different concerns. Company faces different conditions, including dependence on raw materials or natural resources, risk of NGO action, regulatory backlash, carbon risk or energy risk. Companies have diverse environmental impacts: for some, water use is an Achilles heel; for others, it’s waste. Employees have different interests: ideas that may excite, attract and retain staff at a food service company may not inspire employees of a venerable financial services firm.
A number of companies have developed comprehensive sustainability strategies driven entirely by self interest, without a whiff of altruism. One firm we spoke with made a point of declaring that their program was “not about responsibility.” They don’t believe in corporate social responsibility. But they do believe climate change is a grave threat to their interests. So they are investing substantial sums in combating it in word and deed.
Tools for Formulating Purpose
Formulating the purpose of a company’s sustainability program requires a process that unfolds at some companies over many months or even years. It requires gathering and analyzing information from outside the company, as well as introspection and assessment inside the company. Companies consider many points of reference in formulating their purpose, including:
Customer attitudes and behaviors. What are customers’ views about environmental issues and their expectations of your company?
Employee attitudes and behaviors. How does a company’s environmental stance affect employees’ choice of where to work? What do they expect from your company? Are they seeking ways of being engaged at work in sustainability initiatives?
Competitors and industry leaders. How are my competitors tackling sustainability? What are leaders in other industries saying and doing?
Greatest environmental impacts. Sustainability initiatives, to be meaningful, need to focus on areas where their environmental impacts are greatest. Where are your company’s greatest environmental impacts?
Principal environmental threats. Companies heavily dependent on a predictable supply of key raw materials, such as cacao, water, or fossil fuels, are wise to make protecting or conserving those materials or developing alternatives, a pillar of their sustainability programs.
Promising environmental opportunities. Most companies find they can reduce waste, environmental impacts and expenses in the early stages of sustainability programs. Some look farther at how programs can boost their top line. BASF, for example, claims that “climate protection” products account for 10 percent of its sales. Bloomberg expanded its information business offerings introducing environmental, social and governance data alongside traditional investment metrics in its widely used workstation. It also purchased the company New Energy Finance, to provide additional information services to investors in alternative energy and carbon mitigation projects.
What you control. Walmart is recognized for the unusual power it holds over its suppliers. Because it has this power, Walmart has been able to begin demanding that its suppliers improve their own environmental performance as a condition of future business. Other companies with lower leverage over suppliers may start by focusing in improving internal operations, such as water use—areas they can control.
The link to strategy and corporate mission. Sustainability programs gain strength when they are linked to the company’s broader strategy. Outdoor gear maker and retailer REI has company mission to “inspire, educate and outfit for a lifetime of outdoor adventure and stewardship” so it’s easy to see how improving the sustainability of its operations and products are naturally aligned with its mission. Unilver’s strategy depends on tapping burgeoning markets in the developing world to eventually double its business. Framing its sustainability goals in terms of that broader goal—decoupling growth from environmental impact—gives a powerful impetus to its sustainability program.
The table below summarizes the major dimensions of purpose we found in our interviews with sustainability executives.
|Scope||Broad, encompassing environmental and social goals
||Narrow, focusing on environmental parameters
|Respons-ibility||To the world and society
||To ourselves and our stakeholders
Table 1 Sustainability Visions, Missions and Goals
All of these perspectives are valid, so long as they flow from unique situation of the company; address the company’s major environmental impacts and threats; draw on its competencies; complement its core business; are tied to business opportunities; are in harmony with the corporate personality; speak to the goals and aspiration of major stakeholders; and are in sync with the company’s larger purposes where possible.
How does your sustainability program line up?
David Schatsky, principal of Green Research, is a consultant and adviser to businesses on a range of topics, from clean tech markets to corporate sustainability best practices to business strategy in the Internet and information technology markets. Having spent almost a decade as an analyst and senior executive at JupiterResearch, a leading research and advisory firm focused on Internet business, Schatsky is an expert in business strategy, industry analysis and market research.