Brand owners go green

13 December 2010

NEW YORK: Sustainability is playing an increasingly important role in innovation and brand strategy, a new report has argued.

Consultancy KPMG and the Economist Intelligence Unit surveyed 378 senior executives worldwide, finding that 62% of companies now had an official protocol for sustainability.

Just over half had the protocol when similar analysis was conducted in early 2008.

A further 11% of firms are creating formal procedures covering the issue, compared with only 5% that did not intend to implement such a process.

"Sustainability is no longer an 'if', it's a 'how'," said Victoria Mills, managing director, corporate partnerships at advocacy group the Environmental Defense Fund.

The main drivers encouraging this shift were regulatory requirements, on 42%, followed by "brand enhancement" on 41%.

Risk management scored 29%, having been bought into clear focus by events like the Gulf of Mexico oil spill, which has posed significant challenges for BP.

More positively, 61% of contributors suggested that the benefits of investing in eco-friendly practices outweigh the costs, a figure hitting 72% where organisations boasted annual revenues of $5bn-plus.

The primary drawbacks of progressing these business models included a worry that products and services may become more costly, recording 36%, and lower profitability, registering 23%.

Elsewhere, 45% of the sample agreed factors like survival, or short-term performance, were higher up the list of priorities at present.

"The analogy here is that if you think it is expensive to do things for the environment, you should try ignoring it," said Wayne Balta, vp, corporate environmental affairs and product safety at IBM.

"You'll find out how expensive it gets."

IBM has long placed sustainability at the heart of its approach to innovation, and is yielding an impressive payback.

"For every dollar we spend, we are getting $1.50 to $2 back," said Balta.

In keeping with such sentiments, 44% of featured firms perceived sustainability to be a major source of new product development.

Moreover, 39% believed it would provide opportunities to expand into previously unchartered waters in the future.

"Talking about 'green growth', you're saying you can actually increase growth if you are in the right industries, and by the way that will increase resource efficiency," said Sören Buttkereit, head of Siemens' corporate sustainability external office.

"[We see sustainability] not as a compliance topic, but as a strategy topic."

To date, 36% of companies have issued at least one public report on their performance, and 19% have laid out plans to do so.

However, 38% are not likely to pursue this route, partly because setting meaningful benchmarks and generating data is extremely difficult.

Roughly seven in ten executives also thought too many corporations simply regarded sustainability as a PR tool.

Unilever, the consumer goods giant, has established the target to halve the environmental impact of its activity by 2020, a goal applying both to in-house activities and the habits of customers.

"It is a big ambition. It scares us. But it is no good if you are comfortable about it," said Paul Polman, Unilever's ceo.

"It scared the Americans when John Kennedy said he wanted to put a man on the moon within ten years, but they did it."

Data sourced from KPMG; additional content by Warc staff