A Race Toward Sustainability - and Profits: New Report Delivers Powerful Message and Roadmap for Companies
Companies must make immediate and meaningful social and environmental improvements if they are to win in the resource-constrained 21st century.
That’s the message of aoutlining the urgency, vision and competitive advantages for companies that fully embrace sustainability in their business as energy prices rise, water supplies are increasingly contested and the world’s population grows.
"Sustainability performance is fundamental for business success in the 21st century,” said Mindy S. Lubber, president of the investor coalition Ceres, which published the report, . “If businesses deepen their efforts to solve social and environmental threats, it will position them to innovate and compete in the fast-changing, resource-constrained global economy. It is no longer enough for companies to have special projects or initiatives. Comprehensive sustainability strategies are expected.”
Lubber says companies should view sustainability as a competitive race. "This is about understanding risk – including the risk of not seeing the opportunities your competitors see,” said Lubber. "We need accelerated performance improvements from companies that reflect the true scientific and economic impacts of unchecked carbon pollution, growing water scarcity and billions of people still living and working in poverty."
Anne Stausboll, chief executive officer of the California Public Employees Retirement System, voiced strong support for the report's key findings.
"We expect our portfolio companies to do what is necessary to position themselves for a sustainable economy," said Stausboll, whose office oversees more than $200 billion in assets. "Environmental and social issues are core to business performance in the 21st century. We are looking for companies that are managing these risks and developing opportunities."
“Integrating sustainability is not just good for business; it is essential if we are to continue to grow economies and create jobs in a world of increasingly constrained resources,” added Hannah Jones, Vice President of Sustainable Business & Innovation at NIKE, Inc.
The report provides a practical roadmap for integrating sustainability into the DNA of business – from the boardroom, to copy rooms, and across entire supply chains. It calls for significant performance improvements from companies by 2020.
Among the report's 20 key expectations for companies:
- make energy efficiency and renewable energy the foundation for company operations;
- design and implement closed-loop systems so that air and wastewater emissions are eliminated and zero waste is produced;
- require 75 percent of top tier suppliers to meet company sustainability performance standards;
- dedicate 50 percent of R&D investment to developing sustainability solutions;
- compensate and provide incentives for top executives and other employees to drive sustainability into the business.
The report makes it clear that the global economy has unprecedented challenges, whether from soaring population growth, resource constraints or a changing global climate that will require massive investment in low-carbon technology. Many companies recognize these emerging challenges and are already incorporating them into their planning.
Adding to the shifting landscape for companies is the increasingly globalized nature of the market that has companies producing and selling products in all corners of the world, and laser-fast digital communication where company reputations on sustainability issues can be made - or destroyed - in a matter of hours.
The report outlines more than 200 specific activities companies have undertaken that align with the four key chapters of the Roadmap – governance, stakeholder engagement, disclosure and performance – and the 20 expectations for action. Among the examples included in the Ceres report are: PepsiCo’s Frito Lay potato chip facility in Arizona aiming to have zero emissions; IBM reducing energy and water use bills at one facility by $3 million a year while increasing its output by 33 percent; General Mills helping broccoli farmers switch from furrow to drip irrigation, reducing water use by 50 percent or nearly 1.2 billion gallons a year; and Gap’s efforts to remediate the causes of excessive overtime work for suppliers.
The report also highlights key forward-thinking management actions, such as National Grid tying aggressive carbon emission reduction goals - 45 percent by 2020 - to executive compensation; and Timberland’s transparency on all fronts - through quarterly sustainability reporting and CEO conference calls on key challenges, and labeling their packaging with environmental and social impact information for customers.
Still, the report concludes, these best practices are more the exception rather than the rule; no company is fully integrating sustainability considerations across all aspects of its business, including its governance systems, overall performance and top-to-bottom business strategy. "More must be done to produce the results we need to put our global economy on a sustainable path," Lubber said. "Incremental progress in tackling global climate change and other sustainability threats is not enough."
The report roadmap focuses on four key areas, each of which includes key expectations and action steps:
Governance: Companies will embed sustainability from the boardroom to the copy room and will manage their entire value chain from a sustainability perspective. Five areas for elevating sustainability – board oversight, management accountability, executive compensation, corporate policies and management systems, and public policy.
Stakeholder Engagement: Companies will regularly engage in robust dialogue with stakeholders across the whole value chain, and will integrate stakeholder feedback into strategic planning and operational decision-making. Four areas for elevating sustainability – focus engagement activity, substantive stakeholder dialogue, investor engagement, and C-level engagement.
Disclosure: Companies will report regularly on their sustainability strategy and performance. Disclosure will include credible, standardized, independently verified metrics encompassing all material stakeholder concerns, and detail goals and plans for future action vision. Six areas for elevating sustainability – standards for disclosure, disclosure in financial filings, scope and content, vehicles for disclosure, product transparency, and verification and assurance.
Performance: Companies will routinely and systematically improve sustainability performance across their entire operations, extending from the initiation, design and delivery of products and services to the management of employees and the supply chain. Five areas for improving sustainability performance – operations, supply chains, transportation and logistics, products and services, and employees.
Ceres is a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges such as global climate change. For more information, visit http://www.ceres.org