Similar to lean manufacturing, the downturned economy has offered companies an opportunity to sharpen their focus on areas in which sustainability can deliver a competitive edge. As a company investigates new modes of thinking on how to economize, systems are revamped, and new capital investments are made. Johnson & Johnson spend $187 million in capital investments over a four year span and gleamed a rate of return at 19% (Berns, et.al., 8). They directly attributed this to sustainable design.
So sometimes quantifying the success of sustainable pathways is achievable , it’s clear that being branded for social responsibility attracts high-potential employees as well. This is the fifth largest concern, behind the top four profit-only concerns (Berns, et.al., 23). Half of sustainable oriented companies say that they highlight this in their recruitment of potential employees. One third of American workers said that they are willing to give up pay to work for an environmentally friendly company (Miller).
These kinds of statistics capture that attention of many companies, yet 93% of CEO’s who value this importance are not sure how to incorporate sustainability into their company (Lacy, et.al, 2010). There are a variety of sustainability rating methods including: Global Reporting Initiative (GRI), Pacific Sustainability Index, Dow Jones Sustainability Index, Environmental Performance Indicators, UNEP scoring, the Deloitte Touche Tohmatsu scoring system and the Davis-Walling and Batterman scoring system (Morhardt, 161). Yet some companies will opt to produce their reports with self-designed criteria (Morhardt, 213).
The more popular system is GRI. This rating system is used as a stand-alone, or to accompany other reports such as the Social Investment Forum association, or the Standard and Poor’s 500 index. This method has increased in use rapidly over the last few years, and not only in the European Union (GRI) where it was initiated.
Europe, Asia, Latin America and the USA have all had increased submissions of GRI reports. Most of the growth rate in the USA though, has been over the last five years:
Of the Global 500 companies, 37 have chosen to use the GRI reporting method in 2010 alone. These include: Alcoa, Allstate, AT&T, Bristol-Myers Squibb, Chevron, Cisco, Citigroup, Coca-Cola, Dell, Delta Airlines, Dow Chemical, DuPont, Exxon Mobil, Fluor, Ford Motor, General Electric, Hess Corporation, Hewlett Packard, IBM, Intel, Johnson & Johnson, Johnson Controls, JPMorgan Chase, Kimberly-Clark, Marathon Oil, Microsoft, Motorola, Nike, PepsiCo, Procter & Gamble Global, Sunco, Target, Tyson Foods, U.S. Postal Service, and UPS.
Some of the GRI reporters filed the report for one year and then dropped out:
2004 IBM
2005 Gap, Merck USA
2006 Deloitte
2008 Autodesk, American Express, US Army
2009 H.J. Heinz, Monsanto, Walt Disney
There were two corporations that started reporting then stopped:
2002 McDonald's
2007 Nike
2009 McDonald's
2010 Nike
Mostly, companies started using the GRI method and then stuck with it. There are four companies reported from GRI inception as shown below:
It is also very clear that many more corporations are jumping on the sustainability pathway. Newcomers last year include: Campbell Soup, Carnival Cruise Lines, Clorox, Eastman Kodak, HDR, Hershey’s, JP Morgan Chase, Kellogg, Owens Corning, Procter & Gamble, Southwest Airlines, Symantec, United Airlines, the U.S. Postal Service and others.
The trend is that more companies are finding that there is an advantage to utilizing a standard system to track and report qualitative sustainable indicators such as what GRI provides. One of the challenges is that there is a level of transparency with using any reporting method, and this does take some psychological adjusting to alter past corporate cognitive behaviors. Benefits to this includes wanting to do better due to the increased exposure, or bringing into focus unseen issues that should be addressed. Quantitative data does show that it is important to trust that there is a rapid change in business practices coming, even though it may not be clearly defined. How businesses sustainably align with society and the environment, as well as economic goals is no longer just a happy hour hot topic for a good idea. Sustainability in business is today vital to competing in a competitive world.
Acknowledgments:
Berns, Maurice; Bussey, Keith; Murray, Sarah; Vismans, Diederick (2011). “Sustainability: The ‘Embracers’ Seize Advantage.” The Mit Sloan Management Review and The Boston Consulting Group, Winter.
GRI (2011). “GRI Reports: Who is Reporting?” Global Reporting Initiative, http://www.globalreporting.org/ReportServices/GRIReportsList/.
Lacy, Peter; Cooper,Tim; Hayward, Rob; Neuberger, Lisa, (2010). “A New Era of Sustainability: UN Global Compact-Accenture CEO Study 2010, June.
Miller Perkins, Kathleen (2010). “5 Reasons Why Small Businesses Should Care about Sustainability.” Green Biz, October 13. http://www.greenbiz.com/blog/2010/10/13/5-reasons-why-small-businesses-should-care-about-sustainability#ixzz1EdML6LVJ.
Morhardt, J. Emil (2002). “clean, green & read all over.” Quality Press, Milwaukee, WI.
Hi all
ReplyDeleteAccording to the Nobel Prize winning economist Milton Friedman “The corporation’s legally defined mandate is to pursue relentlessly and without exception its own economic interest, regardless of the harmful consequences it might cause to others”. From his point of view Corporate Social Responsibility in a corporation would not sustain easily without looking at the broader picture and taking the moral case for sustainability into account. I believe the best company-specific business cases are developed by people who are in themselves informed and inspired, personally, by the moral case for sustainable development.
Sustainability practices don’t only save money and reduce environment impact and therefore should never be just a business case and considered as a stand-alone matter. When ethics, moral values, standards and the commitment to stakeholders are taken into account as an essential driver for the business case, implementing sustainability in the current carbon constrained economy is simply the right thing to do. Nevertheless, as Joel Bakan wrote in his book The Corporation: The pathological Pursuit of profit and power, “while corporate social responsibility in some instances does much good, it is often merely a token gesture, serving to mask the corporation’s true character”. It can be challenging to separate the moral business case in sustainability programs from the economic justification for those programs themselves since the two are often interrelated. There is mounting evidence and business case studies, which demonstrate the tangible financial and other values of CSR. A 2002 study by Bob Willard states that sustainability practices within large companies can contribute to a profit increase of 38 percent when benefits are aggregated. The “business case” is defined as both quantifiable measures of the business value for the sustainability program (e.g. money saved, energy use reduction, etc.) as well as less easily measurable assets such as reputation enhancement. That study also found that employee commitment to CSR and sustainability was a critical enabling factor contributing to the organizations ROI. Other studies show that companies in the Dow Jones Sustainability Index outperform the general market, and a report from Goldman Sachs found leaders in environmental, social and governance (ESG) policies are also leading in stock performance by an average of 25 percent.
Regards
Danny (danny.kil@gmail.com)