Sustainability gains ground

14 February 2011

NEW YORK: Major brand owners like Unilever, HSBC and Johnson & Johnson are focusing on sustainability, in the belief it will offer significant competitive advantages.

The MIT Sloan Management Review and Boston Consulting Group polled 3,000 executives across the globe, combining these findings with insights from in-depth interviews.

As a result, it divided companies into two groups - "embracers", blazing a trail concerning best practice, and "cautious adopters", proving slower to react.

Some 30% of embracers made products and 23% came from the services sector, and two-thirds of organisations within this group said their prior initiatives had boosted profits.

Exactly half the survey panel argued innovating to achieve genuine differentiation was one main challenge lying ahead for the next two years, while increasing sales posted 39%.

This compared with 16% depicting the opportunities and threats posed by sustainability as an obstacle.

In all, 59% of firms heightened their sustainability commitments and expenditure last year, when 3% cut back, totals standing at 68% and 2% looking to 2011.

"Unlike in previous downturns and recessions, people haven't necessarily put sustainability on the back burner," said Nick Robins, head, climate changes center of excellence at HSBC.

"Our clients are already moving heavily into these areas; some of them are big industrial groups. We have a reasonable share. And with investment coordination, we could claim a greater share."

On a five-point scale, senior leadership received 3.75 points regarding such activity, and customers attained 3.47 points, but only 24% of contributors agreed sustainability constituted a "core strategic consideration."

In identifying the benefits from addressing this matter, 49% of executives referenced improved brand reputation, 28% cited reduced costs and 26% thought it could yield a competitive advantage.

"There is an additional element in the business case, which is brand composition and brand equity," said Santiago Gowland, Unilever's vp, brand and global corporate responsibility.

"The views of consumers increasingly resonate with some of the social, economic and environmental messages of brands."

A further 22% of respondents hoped to access new markets, 21% anticipated gains covering margins or market share having adopted an eco-friendly positioning, and 17% named enhancements to innovation.

Turning to investment, 21% of the sample said spending was managed in the standard way, 19% analysed intangible or qualitative factors, 15% revealed ROI expectations were lower, and 10% asserted longer term timetables are usual.

Difficulties related to evaluating effectiveness include quantifying the impact on reputation, with 3.2 points out of five, and predicting the value of customer uptake, lodging 3.16 points.

However, 54% of participants claimed sustainability was essential to competitiveness and 32% forecast it would become so in the future, measured against 8% not affording it an elevated status.

Another 34% reported past environmentally-driven schemes had enhanced profit levels, 24% broke even, and just 11% suggested these programmes served to drain income.

"It's been better for the bottom line, especially in terms of energy costs," said Al Iannuzzi, Johnson & Johnson's senior director, worldwide health and safety.

"Waste is cost to the corporation," he added. "And, of course, the less waste you send out of your gates, the less expensive it is to make your product."

When choosing "world-class" companies in the field, General Electric topped the charts, doubling the number of votes secured by second-placed Wal-Mart.

Toyota, IBM, Google, Apple and Microsoft all featured in the rankings, as did Procter & Gamble, which has made sizeable investments in this area.

"Nobody's asked me to talk about the business case for several years," said Peter White, P&G's director, global sustainability. "From our point of view, it's a done deal - it's proven, let's get on with it."

Data sourced from Boston Consulting Group; additional content by Warc staff