Currently, most companies understand sustainability is not rampant environmentalism and that it can be a key to having a successful future.
Combining sustainability and corporate social responsibility objectives.
Early on, sustainability started out with the primary objective of improving the environment. It has evolved to embrace environmental, social and economic objectives and also to include social responsibility, transparency and stakeholder involvement; corporate social responsibility (CSR). As individuals, organizations, or governments we all must act responsibly to survive and prosper. The essence of sustainability and corporate social responsibility focuses on stewardship; leaving our world in a better state for future generations. One cannot be responsible without being sustainable and one cannot be sustainable without being responsible. As a result, it is good policy to combine the two and incorporate them into business plans.
Does your organization have sustainability and corporate social responsibility objectives incorporated into your business plans?
Accountability and Transparency
Many companies are willing to be held accountable for their actions and are working to be more transparent. A 2012 study reported that 53% of Fortune 500 companies publish a sustainability report and 63% of those report according to Global Reporting Initiative (GRI) guidelines. A 2011 KPMG survey reports 80% of G250 companies adhere to GRI sustainability Reporting Guidelines. KPMG also reported that companies are increasingly using multiple forms of media to communicate results; only 20 percent rely solely on stand-alone corporate responsibility reports and barely 10 percent restrict their report either to web-only formats or annual reports alone.
Does your company openly report progress against goals and objectives?
As noted above, sustainability and CR involve considering the future and it should involve taking responsibility for ones actions. Superior corporate governance, business ethics, community support, environmental protection, human rights policies, as well as how one deals with workplace issues are all part of being sustainable/responsible. Of course we all realize there is nothing that is 100% sustainable and no individual or organization can be 100% sustainable. Capitalism requires we get better to survive and to succeed. It is through continuous improvement that we can all become more sustainable, more responsible and more likely to survive and prosper. Sustainability is nothing more than continuous improvement. Setting and seeking ambitious goals and building a roadmap will pave the way for necessary continuous improvement.
Sustainability is a path and not a destination; it is easy to get lost. It is written somewhere that because sustainability involves our ability to survive and prosper in the future, people are passionate about it. Leaders find it easy to find followers, who will pursue sustainability, but leaders need to be careful, they must have a plan or they will fail stay on the path. The point is that there are lots of sustainable actions that lead to detours and don’t take you far down the continuous improvement path. It takes goals and a plan to make significant improvement.
Does your company understand the link between sustainability and continuous improvement? Do you have a roadmap leading to clear goals and objectives?
Integrating sustainability into strategies and plans.
In the past, corporate sustainability pioneers were as often defending themselves against reputational or regulatory risk as they were looking for value. Now, however, leading companies are moving from “sustainability 1.0 to sustainability 2.0”, as some describe it. Sustainability 2.0 involves exploiting the markets and opportunities that an understanding of the issues, and of the consumer reaction to them, presents. Adrian Hodges, Managing Director of the International Business Leaders Forum, stated that “(CSR) has moved through a long continuum to where today leading companies are looking at aligning business strategy with societal needs.” A new sustainability era is on the horizon. One 2010 survey by Accenture found widespread agreement among CEOs about what the next era of sustainability will look like: It is one where sustainability is not only a separate strategic initiative, but something fully integrated into the strategy and operations of a company. Integrated reporting acknowledges this and combines financial and CSR or ESG reporting. In 2011, KPMG supported the development of integrated reporting as the next step to improving the value of corporate reporting. The current leaders in sustainability are incorporating sustainability concepts into their strategies and business plans and making it a part of everything they do.
Companies want to translate the strategy into business initiatives that drive financial success. All projects and investments related to the sustainability strategy must demonstrate a clear business case and meet the criteria for delivering value, risk reduction, and leadership in environmental stewardship and social responsibility. Future projects and investments identified as part of this strategy should compete for investment dollars along with other opportunities and initiatives.
A Harvard Business School study that tracked financial performance over 18 years reported that companies with strong environmental, social and governance (ESG) performance outperformed companies with weak ESG performance as measured in accounting terms. Similarly, it has been reported that the companies in the Dow Jones Sustainability Index clearly outperformed the Dow Jones Global Index. There is mounting evidence that companies that lead in sustainability, lead financially. A 2003 survey by PricewaterhouseCoopers reported that 71% of CEOS said they would sacrifice short-term profitability in exchange for long-term shareholder value when implementing a sustainability program. And, a 2008 article by the Economist reported 57% of executives as saying the benefits of pursuing sustainable practices outweigh costs. Specifically, they said sustainable practices can help reduce costs (particularly energy expenditure), open up new markets and improve a company’s reputation. Further the Economist reported that companies with the highest share price growth over the prior three years paid the most attention to sustainability issues, while those with the worst performance tended to do less. Goldman Sachs incorporates 25 quantifiable environmental, social and corporate governance (ESG) indicators to identify investment opportunities. They tell us that companies that are the leaders in sustainable, social and good governance policies have 25% higher stock value than their less sustainable competitors. In 2011, KPMG analyzed the reports of more than 3,400 companies globally, including the 250 largest companies. Of the 250 largest global companies, fully 95% now report corporate responsibility activities. Close to half of the G250 companies (47%) reported gaining in financial value. G250 companies who reported financial benefits were most likely to cite either increased revenues or improved cost savings with improved market share close behind. G250 companies are seeking to be more transparent and currently use assurance as a strategy to verify and assess their CR information.
Does your organization integrate business and sustainability planning and reporting?
The elements of a good sustainability plan should involve four important things: 1) association, 2) benchmarking, goal setting and measuring, 3) reporting, and; 4) development of the tools, techniques, and practices needed to implement more sustainable actions.
Association -To improve, one needs to associate with thought leaders and join organizations that identify and promote best practices.
Goal Setting and Measuring- In order to know how far down the path you have gone, you need to measure your progress according to accepted protocols, benchmark to others and revise your goals appropriately.
Reporting- To maintain transparency and help yourself and others understand your progress, you need to also report your progress according to accepted protocols.
Implementation- And, you will need to develop tools and techniques to help you do your work in a way that results in more sustainable internal operations
To reiterate, the focus should be on continuous improvement, so the plan must include how to identify baselines, benchmark against others, set improvement goals, how to measure improvement, and how to report to employees, suppliers, customers and stakeholders. The plan should also focus on how to identify and communicate with stakeholders to find and create best practices. A plan should identify whether you want to be a leader in the industry, helping to develop training, certifications, and best practices or whether you want to be a follower using these things developed by others.
What gets measured gets managed. Goals are metrics that can be measured, reported and compared to others--benchmarked. PriceWaterhouseCoopers (PWC) reports that public goal setting is not only the norm, but it is nearly universal among sustainability leaders. Further their interviews confirmed the concept that setting goals is a prime opportunity to engage and align the organization, provide strategic direction, and further integrate sustainability into the core corporate strategy. Almost 90% of companies in their survey have public goals, with carbon reduction goals being the most common type (96%). Companies are about evenly split between absolute and intensity carbon reduction goals. The median carbon reduction goal is 20% over six to seven years. While companies with more ambitious goals have a lower success rate, they do achieve the largest impact reduction. PWC concludes companies should strongly consider setting more ambitious goals-- even if they are not successful in achieving them, they will likely be able to point to stronger performance. By applying leading practices to the process of setting environmental and social goals, companies increase their ability to drive change and create lasting business value through sustainability.
It is important to know what your competitors and similar industries are doing.
Caterpiller is an interesting point of comparison. They state the following goals to be achieved by 2020 and report progress toward these goals annually:
Reduce energy intensity by 50% compared to 2006.
Use alternative/renewable energy sources to meet 20% of energy needs.
Reduce greenhouse gas emissions by 50% compared to 2006.
Reduce water consumption by 50% compared to 2006.
Does your organization know what its competition is doing? Does it benchmark its progress against others?
How do you stack up?
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