7/22/2015 | By Sarah Borchersen-Keto
Where does sustainability stand today in terms of being a strategic corporate priority?
In our surveys, about 65 percent of companies report that sustainability is a top management agenda item, and an even higher percentage say it’s necessary to be competitive. But for many companies, while sustainability is essential to being competitive, it is not essential to strategy. It’s on the margins of what they care about when they think of big investments or big business model innovations. One sign of this is we’ve asked why companies are interested in sustainability, and the main reason they’ve given year after year is brand reputation.
There’s a real spectrum of how seriously companies are taking sustainability as a strategic issue. For some, it’s about managing the risk that they won’t be perceived as sustainable. Others actually change their business model as a result of what they are doing with sustainability.
Given the urgency of sustainability issues for our planet and civilization, you actually don’t want such a mixed bag of motivations and behaviors. A mixed bag is a bad bag.
Why is there a need for corporate collaboration on sustainability?
One of the things we found was that companies that were the furthest ahead on sustainability actually collaborated more with customers, partners and suppliers, among others.
Sustainability issues are issues that concern everybody. It’s a collective-action problem and it requires a collective-action solution. The benefits from collaborating on sustainability are known, but it is not yet common practice. Why is that? Understanding and reacting are two radically different things. More than 90 percent of managers say business needs to collaborate to help address sustainability issues, but only 47 percent say their companies are actually doing so.
The benefits from collaborating on sustainability are known, but it is not yet common practice. Why is that?
Understanding and reacting are two radically different things. More than 90 percent of managers say business needs to collaborate to help address sustainability issues, but only 47 percent say their companies are actually doing so.
Our own surveys show that the sustainability issues that matter most to companies are things like energy efficiency, waste management and pollution on the environmental side and things like employee and community health and safety on the social side. The bigger, more global issues just seem too far beyond “the corporate fence line.”
What sustainability trends do you expect to emerge in the next few years?
There is a lot of activity in the investor world around sustainability issues and more demand for reporting on sustainability metrics. A growing number of studies point to how much more profitable companies are that take sustainability seriously. This may be more of a hope than a prediction, but I expect that we will see a relaxing of short-termism in some prominent companies, and this will have a cascading effect on other industry participants.
In the next five years, more attention is going to be paid to the tremendous amount of oil and gas we still have in the ground and what it will take to keep it there. Something like 82 percent of known reserves of carbon in the form of coal, gas and oil needs to stay in the ground if we are to limit increases in the global average atmospheric temperature to manageable or sustainable levels.
And third, I would look at China. If China emerges as a leader—a really big if—on advancing certain sustainability goals such as carbon emissions, this could isolate the U.S. If the U.S. government decided to take a stronger stand with industry as a result, we could see a tremendous rejiggering of the relationship between government and business.
David Kiron is the executive editor of MIT Sloan Management Review’s Big Ideas Initiative. He holds a Ph.D. in philosophy from the University of Rochester and a B.A. from Oberlin College. Since 2009, MIT Sloan Management Review has partnered with The Boston Consulting Group to conduct a global sustainability survey. In 2014, the United Nations Global Compact joined the partnership.