Global study reveals major disconnect between corporate leaders’ concern about the impact of sustainability on their business and the actions they are taking

More than 70 Percent of executives say their company has not developed a clear business case for addressing sustainability, according to a study by MIT Sloan Management Review, in collaboration with The Boston Consulting Group (BCG)

BOSTON, Mass., September 21, 2009 — An overwhelming majority of corporate executives believe that sustainability-related issues are having or will soon have a material impact on their business. Yet relatively few companies are taking decisive action to address such issues, according to a new study by MIT Sloan Management Review.

The study, titled The Business of Sustainability, is being released today in two publications — a detailed report from MIT SMR and a summary of findings from BCG. The findings are based on a global survey of more than 1,500 corporate executives and more than 50 in-depth interviews with experts from a range of disciplines such as energy science, civil engineering, management, and urban studies.

Although almost all the executives in the survey (92 percent) said that sustainability would have an impact on their business and that they were trying to address the issue, most said that their companies were either not taking bold action on sustainability or falling short on execution.

  • Less than a third of survey respondents said that their company has developed a clear business case for addressing sustainability
  • Fewer than 45 percent said their organizations were pursuing basic sustainability strategies such as reducing or eliminating emissions, reducing toxicity or harmful chemicals, improving efficiency in packaging, or designing products or processes for reuse or recycling
  • The majority of sustainability actions undertaken to date appears to be limited to those necessary to meet regulatory requirements

The study identified three major barriers that impede decisive corporate action: a lack of understanding of what sustainability is and means to an enterprise; difficulty modeling the business case; and flaws in execution, even after a plan has been developed. But the risks of failing to act decisively are growing, according to many of the thought leaders interviewed.

“I think that the world has reached a tipping point now,” said Steve Fludder, vice president of ecomagination at General Electric, in an interview. “We’re beyond the debates over whether [addressing sustainability] is something that needs to be done or not — it’s now mostly about how do we do it.” Dierk Peters, former international marketing manager for Unilever, echoed the point that companies need get to get focused and concrete in their action plans: “All the benefits of sustainability are only possible if you tackle the issues on the supply chain. If not, it’s greenwashing.”

While the vast majority of companies have yet to commit to sustainability, there are several noteworthy exceptions. The study profiles a small number of companies that have aggressively integrated a sustainability strategy into their businesses — and are reaping substantial rewards.

  • The five companies cited most often by survey respondents as best practitioners on sustainability were: General Electric, Toyota, IBM, Shell, and Wal-Mart. Other lesser-known names also surfaced, such as Rio Tinto, Better Place, and IWC (International Watch Company)
  • The research indicated that once companies begin to pursue sustainability initiatives in earnest, they tend to unearth opportunities to reduce costs, create new revenue streams, and develop more innovative business models

“One of the most interesting findings was that the more executives know about sustainability, the more they think it matters,” noted Michael Hopkins, editor-in-chief of MIT SMR and an author of the report. “Executives who have been thinking and strategizing about the issues are much, much more likely to see the competitive advantage that a sustainability strategy can grant.”

  • 68 percent of business leaders with sustainability expertise cited improved financial returns as a benefit from their organization’s investments in sustainability initiatives, compared with only 32 percent of novices.
  • While novice practitioners thought of sustainability mostly in environmental and regulatory terms, with any benefits stemming chiefly from brand or image enhancement, practitioners with more knowledge tended to consider the economic, social, and even personal impacts of sustainability related changes in the business landscape.

For more details on the study’s findings and interview transcripts, please visit the Sustainability Initiative Web site at http://sloanreview.mit.edu/busofsustainability/.

To learn more or to arrange an interview with one of the MIT SMR authors, please contact Michael Hopkins at +1 617 253 8071 or mhopkins@mit.edu.

To arrange an interview with one of the BCG authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.


About the Research Methodology

The first annual Business of Sustainability research project — a part of the Sustainability Initiative at http://sloanreview.mit.edu/sustainability/ --had three parts. First, there were interviews with experts in various disciplines at MIT (including civil engineering, energy science, management strategy, and urban studies) and at BCG. Second, the researchers conducted in-depth interviews with more than 50 thought leaders worldwide. The interviewees included C-level executives, managers, academics, and experts from NGOs, government organizations, advisory services firms, and think tanks. Finally, MIT SMR and BCG collected 1,560 responses from corporate executives and senior managers to a 20-question electronic survey throughout March and April 2009. The large number of survey responses allowed for statistical significance across all of the major categories (e.g., industries and geographies) examined. An additional 462 survey responses from nonprofit executives, academics, government officials and others were analyzed separately.

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