A study conducted by AT Kearney found that companies who show a "true" commitment to sustainability outperformed their peers in the financial markets during this recession.
In 16 of 18 industries examined, companies recognized as sustainability-focused outperformed their peers over three and six month periods, and were well protected from value erosion. Companies performed 10% higher over a 3-month period and 15% better over 6 months. The difference in performance translates into an average $650 million market cap per company.
Kearney’s results suggest investors reward companies that have:
* a long term focus, rather than just short term gains, attracting the "right" kinds of investors
* strong corporate governance: have a system of checks and balances on business ethics
* sound risk management policies: requires a long term view to consider how today’s trends might
affect business down the road, allowing them to incorporate sustainable practices into strategy now.
* a history of investing in green innovations: those that have been doing it the longest, reap the most benefits in efficiency, emissions and waste reduction. They can be opportunistic in creating leading edge technologies/ products.
Another study, "The ROI of Sustainability: Making the Business Case," conducted by Aberdeen Group Technology Research, concludes sustainability strategy is no longer "nice to have" but a "must have" business imperative for companies – across sectors and geographies. Aberdeen Group benchmarked over 200 enterprises involved in sustainability initiatives, and determined what Best-in-Class companies (those performing at the top 20% across several sustainability metrics) are doing to achieve their impressive gains.
- Best-in-Class companies reduced energy costs by 6%; Average companies increased energy costs 4%; and Laggards’ increased them by 18%
- Top performers increased customer retention rates by 16% while driving sustainability-related costs down by almost 8% across the board
- Best-in-Class are 52% more likely to incorporate sustainability metrics into value chain performance management
- Best-in-Class are 52% more likely to use sustainability to guide major portions of their corporate strategy
Finally, an IBM study found that senior executives say that despite the recession, they are committed to continue incorporating CSR principles into their business strategies – to improve business performance, societal contribution and reputation.
60% of respondents believe CSR is more important to their businesses now than it was a year ago; only 6% say it’s less important. 87% of executives say their CSR efforts focus on improving efficiency, and 69% use CSR to help create new revenue opportunities.
Yet, only 19% collect data on a weekly or more frequent basis, which is necessary to make systemic changes that would reduce environmental impact, lower costs and address inefficiencies in CO2 emissions, water, waste, energy, sustainable procurement, labor standards, product composition and product lifecycle.
Most collect information quarterly (32%); 24% collect information monthly. — ample perhaps for meeting government or stakeholder demands for information, but not nearly enough to make systemic changes that would reduce environmental impact.
Few companies gather enough CSR data from global supply chain partners – missing a major opportunity to reduce inconsistency, inefficiency, waste and risk that can ripple through a global supply network; 29% don’t collect any supply chain data, and 80% don’t collect supplier data for CO2 and water.
Another gap is that most companies still don’t understand the concerns of their key stakeholders, particularly customers, and are not actively engaging them. That means they’re not capturing valuable insights that could improve their businesses and provide access to new opportunities. 65% say they aren’t clear on customers concerns regarding CSR issues and 37% don’t conduct any research on the topic.
Respondents who report outperforming competitors are doing all those things better – collecting and analyzing the right data frequently to make better decisions, incorporating CSR information from suppliers, and engaging with customers.
Outperformers rank consistently higher in collecting every type of CSR information frequently or in real-time across all major green and sustainability categories — from CO2 emissions and water conservation to ethical labor standards and sustainable procurement. They also ranked higher in information collection from suppliers. Twice as many outperformers say they understand customer concerns about CSR and are more proactive in collaborating with key stakeholders.
"Our survey participants clearly understand that integrating CSR considerations into their business strategies is essential to their growth and performance," says Eric Riddleberger, who heads IBM’s CSR consulting practice. "But it’s also pretty obvious many of them don’t know what they need to know to actually make changes that would improve both business performance and societal impact."
Taken together, the two studies show that the more committed a company is to sustainable practices, the more data they collect and the more they act on it, leading to verifiable performance gains, the ability to innovate and reduce costs. The most sustainability-oriented firms may well emerge from the recession stronger than ever and recognized by investors who appreciate the true long term value of sustainable practices.
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www.ibm.com/gbs/csrstudy
www.atkearney.com/images/global/pdf/Green_winners.pdf
Aberdeen Report: http://www.aberdeen.com/summary/report/benchmark/5908-RA-sustainability-environmental-stewardship.asp
To learn more about IBM’s sustainability consulting practice: www.ibm.com/gbs/sustainability
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