SUSTAINABILITY’S NEXT FRONTIER
Walking the Talk on the Sustainability Issues That Matter Most
In this 2013 report, new research by MIT Sloan Management Review and The Boston Consulting Group looks at companies that “walk the talk” in addressing significant sustainability concerns. So-called “Walkers” focus heavily on five fronts: sustainability strategy, business case, measurement, business model innovation and leadership commitment. For them, addressing significant sustainability issues has become a core strategic imperative and a way to mitigate threats and identify new opportunities.
INTRODUCTION
For the past five years, MIT Sloan Management Review and The Boston Consulting Group have collaborated on an annual research project to assess how businesses address their sustainability challenges. In the past, we focused on sustainability broadly as a business agenda and how that agenda drives profits and business model innovation. This year, we turn our attention to sustainability’s next frontier: addressing the most significant sustainability issues. These are the key social, environmental and economic issues that, if not embraced or addressed, can thwart a company’s ability to thrive — or even survive.
What are the most significant social, environmental and economic sustainability issues confronting companies? (See What is Material Sustainability?)
How thoroughly are businesses addressing these issues?
What are companies that thoroughly address significant sustainability issues doing differently than other companies?
Our findings are both encouraging and disconcerting. Although some companies are addressing important issues, we found a disconnect between thought and action on the part of many others. For example, nearly two-thirds of respondents rate social and environmental issues, such as pollution or employee health, as “significant” or “very significant” among their sustainability concerns. Yet only about 40% report that their organizations are largely addressing them. Even worse, only 10% say their companies fully tackle these issues.
Companies that perceive sustainability issues as significant and thoroughly address them share distinct characteristics. For example:
More than 90% have developed a sustainability strategy, compared to 62% among all respondents.
70% have placed sustainability permanently on their top management agenda, compared to an average of 39%.
69% have developed a sustainability business case, compared to only 37% of all respondents.
These leading companies suggest a path forward. We call them “Walkers” — companies that “walk the talk” by identifying and addressing significant sustainability concerns. How they do so is a major finding of this research. Walkers focus heavily on five business fronts: sustainability strategy, business case, measurement, business model innovation and leadership commitment. “Talkers,” on the other hand, are equally concerned about the most significant sustainability issues, but address those issues to a far lesser degree. They also score much lower on the five fronts.
Although we found that some companies are making progress toward the next frontier of sustainability, data from the past five years shows that many organizations are struggling to move forward. For example, the percentage of companies that have established a sustainability business case has only grown from 30% to 37% during this period. The percentage of companies that have tried but failed to build a business case has increased from 8% to 20%. More than half of the respondents have either failed to establish a business case or haven’t even tried to create one (see Figure 1).
The percentage of companies that report their sustainability efforts are adding to profits has consistently come in at roughly 35% since 2010 (see Figure 2). Many companies have hit a crucial inflection point. They have reaped the immediate gains from sustainability but have yet to thoroughly embark on the next level: addressing the most significant sustainability issues.
However, some companies — Walkers — have moved past this inflection point. Addressing significant sustainability issues has become a core strategic imperative that these companies view as a way to mitigate threats and identify powerful new opportunities. In this report, we look at how businesses are defining their significant sustainability issues and tackling this new frontier.
read the complete article at the link below.