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Sustainability Strategies on the Rise, But Fewer in US

Almost 55 percent of U.S. executives say their organization has a formal sustainability strategy, compared to 62 percent of companies worldwide, according to a survey by KPMG.

The proportion of global companies that have sustainability strategies is up from just over half in February 2008, according to Corporate Sustainability: A Progress Report, which KPMG produced together with the Economist Intelligence Unit.

In the U.S., in addition to the 55 percent of companies with sustainability strategies, another 12 percent say they are working on a strategy and 19 percent expect to eventually develop a formal plan.

Globally, big companies are much more likely to have such strategies: 79 percent of public companies with revenues over $1 billion said they had all-encompassing strategies for corporate sustainability, compared to 49 percent of private companies with revenues under $500 million. Global take-up also varies by sector, with as many as eight in ten consumer goods firms developing sustainability strategies.

“These results are encouraging and we see highly focused companies continuing to make progress in developing and implementing sustainability strategies that they say result in greater profitability and efficiency,” said John R. Hickox, who leads KPMG’s Climate Change & Sustainability (CC&S) practice in the Americas.

“Many others remain challenged, however, as to what issues or measures they should use for reporting their environmental health, safety and corporate social responsibility program results to stakeholders – and how to utilize those metrics to transform their business operations,” Hickox added.

The study found that creating or finding reliable internal data was the most often cited hurdle in sustainability reporting in the U.S., with 78 percent saying it was a moderate or major challenge. Meeting the reporting requirements of a variety of stakeholders, and determining meaningful benchmarks for peer-to-peer comparisons, were both cited as moderate or major challenges by 73 percent. Determining what to report on was cited by 65 percent.

More than 43 percent of the U.S. respondents also said that it was difficult to overcome organizational focus on other programs that provide more readily measurable short-term financial benefits.

Asked to identify the top three benefits from their sustainability program, the U.S. respondents most often chose: better or more efficient business processes and practices, increased profitability or shareholder value, and the ability to attract or retain new or existing customers. U.S. executives identified the key business drivers of sustainability-related business objectives as enhancing brand reputation (37 percent), regulatory or legal compliance (35 percent), reducing costs (34 percent), product or service differentiation (24 percent), and increasing profitability and managing sustainability risks (both 23 percent).

Other business drivers for U.S. respondents included: customer retention (20 percent), staying competitive (15 percent), generating shareholder value (13 percent), and recruitment and employee retention (8 percent).

In a 2008 study, only 31 percent of respondents said the biggest benefit of adopting sustainability would be increased profitability; in the new study, 48 percent of global executives said implementing sustainability strategies would boost the bottom line in some way, either by cutting costs (27 percent) or increasing profitability (21 percent).

Sustainability-related metrics and objectives are now being applied more frequently to investment and project decisions, and are therefore helping to reshape this decision-making, the report said.

The survey, conducted in October, polled 378 senior executives, 86 from the U.S. KPMG timed the report’s release to coincide with the launch of its new Global Center of Excellence in Climate Change & Sustainability, based in the Netherlands.

Clarification: This article has been amended to clarify which results pertain to global respondents and which pertain to U.S. respondents only.

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