More Evidence of the Business Case for Sustainability

The growing body of research that connects business success with corporate sustainability performance is nearing conclusive. With signals of a global economic downturn getting stronger, the need for a strong business case is increasingly important, as fewer companies will be willing or able to embrace sustainability initiatives on faith alone. Several new studies refine the relationship.

SustainAbility, a leading UK consultancy and think tank, released two recent reports on the subject.
Buried Treasure: Uncovering the Business Case for Corporate Sustainability, synthesizes the accumulated evidence on the positive pay-off corporations gain when they adopt triple bottom line strategies. [sorry this link is no longer available]

According to the authors, “The jury is in – overall, corporate sustainable development performance has a positive impact on business success.” Although the business case is strongest when multiple measures of business success are considered, brand value & reputation benefited most from a company’s focus on sustainability. There are also significant links to other business success dimensions like shareholder value, operational efficiency, human and intellectual capital, and risk profile. Superior environmental performance (in particular, eco-efficiency) shows the highest correlation with financial performance. Other dimensions ­ particularly good workplace conditions and strong ethics, values and principles ­ also correlate with increased business value.

These relationships can be measured using verified financial results and do not need to rely on indirect or intangible measures of success. The biggest research gap plaguing the business case question as a whole is the lack of robust, generally accepted measures of corporate sustainability performance.

Business in the Community, a UK non-profit of leading businesses, conducted a two-year study which concludes that appropriate measurement and management of social impact can enhance company reputation, improve competitiveness and help to avoid or reduce risk.

“But a bewildering plethora of codes, guidelines and standards across the world have shown just how complex the process of measuring and reporting has become.” To simplify matters, they are testing a self assessment tool based on standard criteria for measuring social responsibility. Over the next two years, 20 companies will feed information about their performance against the core indicators onto a web site, the first live reporting portal for social responsibility. Some of the companies are: Prudential, Sainsburys, Hasbro, Jaguar, Severn Trent, Zurich Financial Services, and Thames Water and Co-operative Insurance Services. [sorry this link is no longer available]

Another SustainAbility report, The Global Reporters, analyzes how well readers can make judgments about a company’s sustainability performance by reading its report. From a sample of 50 reports, the authors conclude that although corporate multinationals are becoming more transparent they still fail to address major environmental and social impacts. “Most reports overlook the proverbial ‘elephants in the bedroom’, the central sustainability issues that are affected by the company’s activities.” Also, none of the companies systematically discussed their impact on developing countries – the core concern of corporate critics.

UK airport operator BAA and Danish pharmaceutical company Novo Nordisk received the top scores of 62% – the average score was 43%. SustainAbility Chairman John Elkington notes, “Companies recognize society’s growing interest in their ethical performance and are beginning to take it seriously. Their biggest challenges now are to address the missing pieces: how sustainable development activities are integrated into and justified as part of their regular business activities; how they are accounting for their activities in and impacts on developing countries; and how they account for impacts right across the supply chain.” [sorry this link is no longer available]