In my role as CSO, in addition to my day-to-day responsibilities, I read.....a lot. I am always on the lookout for interesting stories that affect corporate sustainability. Whether they cover trends in the economy, how other businesses are going green, best practices, new government legislation, or technological innovation, I have to admit I am a bit of a sustainability junky. Every month I stumble across insights that I believe are important to the future of green business, and I’m planning on sharing some of those with you going forward. Here are a few from the last month that caught my eye.
Sustainability seen as a competitive necessity
A recent report from MIT Sloan Management Review and The Boston Consulting Group claims that sustainability has broken through into the mainstream of corporate strategy, with most survey respondents saying that sustainability is on their companies’ management agendas to stay. And that is more than just lip service. As Forbes recently reported:
The study, Sustainability Nears a Tipping Point, found that two-thirds of companies see sustainability as a competitive necessity in today’s marketplace, up from 55 percent a year ago. In addition, 31 percent of companies say sustainability is boosting their profits and 70 percent report that sustainability has a permanent place on their management agenda. Two-thirds of the respondents also said that managers are paying more attention to sustainability, and investing more in sustainability, than they were a year ago.
The data, which include responses from 2,874 executives in 113 countries, “suggests that the sustainability movement is nearing a tipping point, the point at which a substantial portion of companies are not only seeing the need for sustainable business practices, but are also deriving financial benefits from these acts,” the report concludes.
Those are a couple of powerful paragraphs. Competitive necessity, boosting profits, management buy in, financial benefits! The one that catches my eye the most is that businesses are “investing more in sustainability than they were a year ago.” This is a theme I have seen recurring in many news sources and is especially heartening, given the difficult economic times.
Sustainability Investments by Corporations Not Slowing Down
So why are investments in sustainability continuing to gain momentum in the face of economic uncertainty? Is it concern for the environment? Pressure from customers and supply chain partners including sustainability in their RFP’s? Employee enthusiasm? All of those are important and certainly having an effect. However, TriplePundit makes a strong case for the straightforward return-on-investment potential of energy efficiency projects. They claim it is just a more productive way to invest dollars in today’s market.
The Return On Investment (ROI) on US 10 year bonds is 2 percent and the 2011 Standard and Poor 500 stock index closed the year with zero appreciation. Energy efficiency investments now offer 10-50 percent ROIs making them the superior investment available today in the United States.
In response to electricity price inflation, 52 percent of US companies report targeting a 25 percent reduction of their electricity consumption by 2014.
If they succeed, that would represent a cut in electricity consumption by US corporations of 13% in the next two years. That is a lot of money dropping to the bottom line. And it is not just US corporations that are upping their investments in sustainability. As GreenBiz reports:
Sustainability spending by major firms in the United Kingdom is expected to grow 12 percent this year, 20 times faster than the country's GDP, according to a forecast by Verdantix.
The independent analyst firm also forecast that green spending will grow steadily, averaging 16 percent a year through at least 2015.
"Despite the sluggish economy, spending by large firms in the UK on energy, environment and sustainability initiatives is set to increase by 12 percent in 2012," said Verdantix analyst Susan Clarke, the author of the report, in a prepared statement. "By contrast the UK economy is only expected to grow by a paltry 0.6 percent."
Investors Act on Climate Change
While it is heartening to see so many businesses looking at sustainability as an opportunity and in investment in their future, it has also been fascinating to watch the institutional investment community assess the risks and opportunities provided by climate change.
I was recently in New York with 450 global investors controlling tens of trillions of dollars from four continents when they gathered in January at the United Nations for the Investor Summit on Climate Risk & Energy Solutions. As Ceres, the non-profit group that has organized the international summit, reports:
Climate change creates enormous economic risks, but investors know it also represents one of the great financial opportunities of our time. And they are not waiting for governments to start moving on their own toward action.
“Climate change is certain to be a major factor in investments for the foreseeable future—perhaps the biggest investment factor of our lifetimes,” said Kevin Parker, global head of Deutsche Asset Management. He announced that although the pace of climate policy momentum slowed in some countries, the trend nevertheless remained strongly positive with 45 new, carbon-reducing policies adopted globally in 2011 compared with only four negative policy actions.
Investors signed onto an action plan calling for greater private investment in low-carbon technologies and tougher scrutiny of climate risks across their portfolios. Investors also announced new guidelines on how companies should be boosting their attention to climate risks and opportunities – and promised much closer scrutiny of companies that ignore them.
With investors representing this much market clout, you can be sure that their voices will be heard in the months and years to come. To hear from them first hand, watch this short video interviewing several of the attendees at the conference.
So to sum up: The large majority of businesses now see sustainability as a competitive necessity, they are continuing to invest in it even in an economic down cycle, and the world’s largest investors see climate change as an ever more important investment indicator. These are some powerful trends. What are you seeing? Are there trends that you are following? Let me know and let’s keep the conversation going.