Business + Sustainability

Two news clips with conflicting messages on the impact of sustainability on business caught my attention on Twitter this morning:

Mark Fulton @DeutscheBank: “We need to get the message out that sustainability really does give superior risk-adjusted return” #sust24  - Carbon Disclosure Project

Businesses say #sustainability is vital in the long term, but margins are lower on sustainable products http://ow.ly/b5VUa via @Accenture - BusinessWire Corporate Reponsibility News

Reading into the BusinessWire article uncovers more detail: “A majority  [of CEO’s] (56 percent) say it is currently more expensive to be a sustainable business. 49 percent say that margins are currently lower on sustainable products and services.” Full report is here.

We’ve come a long way in the past two decades toward finding solutions that meet business needs more sustainably, but I expect we’ll continue to see conflicting messages for several more decades before we optimize. Sustainability in business is still in “early stage” development as a field and practice. Some standards have emerged – Carbon Disclosure Project, Global Reporting Initiative, UN Global Compact – while others are still being defined and tested – supplier scorecards, design standards, “green” product marketing.

We’re a long way from optimizing sustainability in business. My response to the CEO’s cited in the Accenture report is: the early results are in that sustainability leads to better business, but each industry and company needs to invest the resources to figure out how it works for them.

Where are you seeing emerging success stories?

A week of trends, good and bad, for sustainability in business. Three landmark reports were released this past week that provide directional indicators of sustainability adoption by business and consumers.

First, the good trend:  new models for supplier engagement. Apparel company Levis Strauss and Ceres, a coalition of investors and environmental groups leading the charge on sustainable investments, co-authored a report that describes Levis’ new initiatives to engage suppliers on human rights. While this is an individual company case study, it’s part of a larger trend for more relational engagement of suppliers to address sustainability and social impact concerns. Companies like Levis, Nike, Ford, Dell, and Walmart are proving a new model for supplier engagement that we’ll likely see replicated and scaled in coming years.

Now the bad trends: U.S. business progress on sustainability is not on track and U.S. consumer participation in social causes declined. Ceres published a bold roadmap to corporate sustainability in 2010 and released a report this week announcing that progress is “disappointing”. Specifically, only a third of the 600 companies it studied had set time-bound greenhouse gas emissions targets, let alone made progress toward meeting them. Indicators for governance, human rights, and stakeholder engagement are equally discouraging.

On the consumer spectrum, a study by PR firm Edelman finds that consumers have actually decreased their involvement in social causes. Edelman tracks consumer involvement in social causes, which is a rough indicator of consumer preferences for brand alignment with social issues, according to the report. U.S. consumer involvement in a social cause dropped to 53 percent this year from 60 percent in 2010.

This isn’t news to anyone who works in this field. Sustainability department budgets are growing modestly, if at all, while many companies still have no goals or strategy and there’s no clear sign from investors, consumers, or regulators that sustainability is a top concern. The market just isn’t rewarding sustainability investments or sending clear signals to prompt further sustainability initiatives by companies.

Do we need more structural change such as fixing externalities, water and carbon pricing?