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Two significant trends have emerged in relation to this burgeoning network: One is that companies, as well as partners in their value chain, have become much more transparent about their own sustainability-related activities. Corporations are doing more to track and communicate sustainable practices, just as more tools have become available to consumers and non-corporate actors to measure and monitor un sustainable business activities.
Notably, social media and other technology platforms have become effective mechanisms for heightening awareness of crises and corporate misbehavior, exerting increased pressure on companies to respond. A second trend relates to groups of companies or nations working together to forge new standards and goals for sustainable business practices. Just last year, representatives of countries ratified a landmark climate agreement in Paris to set nation-by-nation limits on greenhouse gas emissions beginning in The Paris Agreement will likely have a significant impact on the global economy and focus sustainability practices in industries around the world.
Even with a climate skeptic at the helm of the executive branch of the U. Despite this progress, corporate sustainability has arrived at a crossroads. In one direction, corporate leaders in sustainability remain a minority and are unevenly distributed across geographies and industries. In another direction, the natural environment continues to change as a result of human activity. Catastrophic loss events from naturally occurring events like floods, earthquakes, and droughts are becoming more frequent and intense, 8 threatening regional economies and compounding resource-scarcity issues that afflict many areas.
In still another direction, global economic inequality presents a growing risk to globalization and international market stability. Public attitudes toward government regulation and efficacy also intersect with corporate sustainability. With populist and anti-regulatory leaders on the rise, trust in government institutions reaching a low point, and some political leaders denying the reality of climate change, the potential for corporate sustainability to lose momentum or backslide is all too real.
In the United States, the coal industry is undergoing a wave of deregulation, prompting concerns that the U. Elsewhere, deforestation rates in the Amazon rainforest are on the rise after a decade of declines, pointing to the potential for broad reversals in recent trends. If backsliding is to be avoided, corporate leaders have an urgent need to accelerate their sustainability efforts and resist the siren song of new anti-regulatory incentives that tempt leaders to scale them back.
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What can corporations do to hasten their sustainability efforts? A first step is to better understand the progress corporate sustainability has already made, and then build on those lessons.
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MIT Sloan Management Review and The Boston Consulting Group have been tracking developments in corporate sustainability for the past eight years, surveying tens of thousands of managers and interviewing hundreds of executives and thought leaders, while producing eight annual reports and numerous blogs and articles. See Appendix for summaries of the reports, in addition to links. To see how far corporate sustainability has come, one need look no further than the financial sector.
Think of the financial sector as a group of organizations that includes not only retail and commercial banks but also central banks, insurance companies, re-insurance companies, asset management companies, investment funds, venture capitalists, private equity companies, institutional investors, and stock exchanges.
But even this majority understates how much investors really care about corporate sustainability. Seventy-four percent of surveyed investors agreed that sustainability performance matters more than it did three years ago. Investors care more about sustainability than many managers believe. Companies have been complaining for years that nobody cares about sustainability, but investors care, and companies need to up their game. Many efforts are underway to guide companies on how to report environment, social, and governance ESG metrics.
Below are three examples of organizations that address this: Many new analytics tools and platforms are making ESG performance information easier to access — and make sense of. Investors are not just looking for information; they are also looking for new sustainability-oriented investment products.
Even with the proliferation of information, tools, products, organizations, and networks aimed at advancing or exploiting corporate ESG conduct — along with heightened awareness among executives and public interest in corporate sustainability — the advancement of sustainable business practices within companies is irregular across industries, geographies, and company size.
Companies that are leading the corporate sustainability movement have many things in common, but a fundamental one is having a sustainability strategy. Sustainability strategies are not created equal, however, and their relevance to core business activities varies widely among organizations. Since every company has a unique organizational structure, supply chain, employee base, geographic footprint, and so on, it is logical that every company also has a unique sustainability profile.
This makes variety in sustainability strategies inevitable. For other companies, sustainability strategy is linked to their overall business strategy, often encompassing the supply chain and customer segments. We discuss differences between these strategies below. Corporate leaders in sustainability not only articulate a vision for their sustainable business but also connect that vision to a strategy. Many companies have no real sustainability strategy at all. Instead, they have projects, anecdotes, and examples they make available to shareholders, regulators, and consumers in the form of glossy sustainability reports.
Our research indicates that companies struggle to find a payoff from sustainability until they develop a true sustainability strategy and build a solid business case. Dave Stangis, vice president of public affairs and corporate responsibility at Campbell Soup Co. Industries that have the highest percent of companies with a sustainability strategy are in chemicals, energy and utilities, industrial goods and services, and machinery see Figure 2.tax-marusa.com/order/vekyjan/espionnage-gsm-gratuit.php
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These, of course, are highly regulated industries with substantial environmental and health and safety concerns, as well as significant resource needs or constraints. Sustainability issues are an inescapable aspect of these industries, with many concerns becoming material to the success and failure of their businesses. For companies in these industries, having a sustainability strategy is practically mandatory. In the energy sector, for example, oil and gas companies often need to address environmental and social factors in order to meet the expectations of communities in their operating and market environments; a broader strategic approach to sustainability that embraces more of their business is a necessity.
For companies in the coal sector, for instance, a sustainability strategy might mean shifting their corporate focus away from coal products. With the United Kingdom prohibiting the use of coal plants after , Drax, a power company, is moving aggressively to transform its coal plants into wood pellet-burning plants and to increase its wind and solar energy capacity. The share of companies with sustainability strategies varies across regions.
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The percentage of companies with a sustainability strategy has steadily increased in Australia, Europe, and Latin America see Figure 3. Unsurprisingly, businesses that operate in multiple regions have the highest share of sustainability strategies. Northern America 22 has a relatively low proportion of organizations with sustainability strategies, and there is a significant risk that the deregulation push of the current U.
Companies in both North and Latin America are less likely to view sustainability-oriented strategies as necessary to be competitive see Figure 4. Internal or external forces may drive adoption of a sustainability strategy. In Latin America, for instance, external pressures in the form of new regulatory policies are driving adoption of sustainability strategies in the mining industry.
Mining incidents and popular protests are spurring regional governments to strengthen the criteria that companies must meet in order to obtain, and maintain, their license to operate. In other Latin American industries, strong leadership motivates adoption of sustainability strategies.
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SA is a case in point. In general, many of the organizations from Latin American and Asia-Pacific countries that are represented in our survey are in countries such as Brazil, Colombia, Indonesia, and India, where ESG factors are significant features of the market environment. The largest companies in our database , or more employees have consistently been the best performers across a range of metrics.
They are also most likely to report that sustainability has been a top priority for management. Moreover, the share of large organizations that have changed business models because of sustainability innovation is greater than those of both midsize 10, to , employees and smaller companies. Many large companies are looking to emerging markets for growth, and those markets can be rife with sustainability-related issues. Doing so raises the bar for sustainable business practices in all of the markets where the company operates.
Unilever is a prime example. One takeaway from the performance of the largest companies is that there is an excellent opportunity to improve the sustainability performance of smaller corporations. A major constraint for those organizations is that their leadership tends to view ESG factors as necessary issues to address, rather than as sources of business opportunity.
Incremental change and eliminating externality risks are not enough to produce meaningful results. Companies with successful sustainability strategies connect their sustainability efforts with issues and activities that are material to the business.