Waking up to sustainability karma

February 7, 2013

By Dasha Afanasieva

Management consultants often urge their clients to view setbacks or difficulties as opportunities. The cost of reducing environmental impacts are often cited as one such “opportunity”.

But a global study from consultancy BCG and MIT Sloan Management Review has shown that companies are increasingly putting this advice into practice and succeeding in getting the returns.

The study is based on a survey of 2,600 executives and managers from companies around the world and found that the number of companies achieving a profit from introducing changes aimed at making their business more sustainable rose 23 percent last year, to 37 percent of the total.

Nearly half of the companies have changed their business models to try to make the most of sustainability opportunities—a 20 percent jump over last year.

Nor is a preoccupation with sustainability the reserve of the developed world.

Companies in emerging markets change their business models as a result of sustainability at a far higher rate than those based in North America, the study found.

In fact, North America has the lowest rate of sustainability-driven business-model innovation and the fewest so-called “business-model innovators”.

The authors of the report reckon food group Kraft is a perfect example. Through sustainable sourcing, adopting models such as the Rainforest Alliance – a guarantee of environmentally and socially responsible harvesting – and Fair Trade and branding their products accordingly, Kraft, the report argues, has been able to open up new consumer segments. In the UK, the Rainforest Alliance Certified seal is gaining double digit growth. In addition, making packaging more sustainable has cut Kraft’s costs.

Outdoor clothing manufacturer Patagonia used what some might call a gimmick – in a New York Times advert, it invited customers to not buy a jacket and sign a pledge that committed both the customer and Patagonia to reducing consumption and waste by only buying items when needed, repairing and eventually recycling items.

It appears that investors are also waking up to the potential profitability.

Principles for Responsible Investment (PRI) – a UN initiative which connects investors working to incorporate principles of sustainability into their investing –   has attracted some 1,100 signatories that represent over $30 trillion in assets since its inception in 2006.

PRI’s signatories – a mixture of asset owners, investment managers and professional service partners – commit to working towards responsible investment goals and to being transparent on their progress.

For example in PRI’s 2011 Reporting and Assessment process, 38 per cent of asset owners reported that they made investments in social and environmental areas.

But for all the Krafts and Patagonias of this world, plenty of companies still struggle to see sustainability as an opportunity.

Almost half of those surveyed by BCG find it hard to quantify the effects of sustainability, and 37 percent say it conflicts with other priorities.

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