Nearly a third of companies now say that the adoption of sustainable practices has added to their profitability, according to a — and manufacturing firms are in the vanguard.
Two-thirds of more than 2,800 companies surveyed by MIT Sloan Management Review say they have made sustainability a permanent agenda topic within their companies, up from 55 percent a year ago. And most respondents 鈥 based in 113 countries, and spanning a wide variety of sizes and industries 鈥 now see sustainability as 鈥渘ecessary to be competitive鈥 in today鈥檚 economy. The study was conducted with the help of the Boston Consulting Group.
鈥淭he purpose of the report was to get a high-level view of how organizations are thinking about sustainability, and what they are doing about it,鈥 says David Kiron, executive editor of MIT Sloan Management Review and a co-author of the report. 鈥淭he attention and investment we see indicate the here-to-stay nature of sustainability for organizations everywhere.鈥
Manufacturing companies seem to be leading the way in this new approach: The survey found a particularly strong commitment to sustainability among 鈥渞esource-intensive鈥 producers of consumer products, commodities, chemicals and automobiles, as well as in energy-related companies. Respondents said product development was enhanced by a focus on sustainability, with 25 percent of companies citing 鈥渋mproved innovation in products and services鈥 as among the top benefits they derived through sustainability.
Sustainable practices help cut energy and commodity prices by reducing waste, and in some cases have transformed companies from pariahs to paragons in the eyes of environmentally aware groups.
For example, paper-products manufacturer Kimberly-Clark has moved from criticism over its cutting of old-growth forests to a top Dow Jones Sustainability World Index ranking among makers of personal products, thanks to a concerted company-wide effort to make sustainability a priority. In addition to curbing former unsustainable practices, Kimberly-Clark now aims to reach 25 percent of sales by 2015 from 鈥渆nvironmentally innovative products鈥 鈥 such as a new kind of toilet paper without a cardboard tube at the center.
In this study, Kiron says, sustainability encompassed not just reductions in energy use and emissions, but also more efficient use of water and natural resources; recycling of materials and careful attention to the full life-cycle impact of products, including their ultimate disposal; and attention to human rights in the treatment of employees and suppliers.
Kiron cites Starbucks鈥 focus on improving the sustainability of its coffee cups 鈥 of which the chain uses billions every year. To find innovative ways of reducing the waste associated with disposable cups, the company has convened conferences at MIT in an effort to come up with more environmentally friendly approaches. 鈥淭here isn鈥檛 a hard line for them between environmental and social issues,鈥 Kiron says. 鈥淚t鈥檚 all part of being socially responsible.鈥
The study makes clear that the more deeply ingrained sustainability is within a company鈥檚 organizational structure, the more likely it is that these practices add to the company鈥檚 bottom line. For example, companies that say they have profited from their sustainability initiatives are 50 percent more likely to have a CEO strongly committed to the programs, are twice as likely to have a separate reporting process for sustainability, and are more than twice as likely to have a chief sustainability officer.
Sometimes, internal efforts to improve sustainability can lead to new product offerings. For example, UPS improved efficiency by designing the shipping industry鈥檚 most comprehensive tracking system. That made it possible to determine the exact carbon-emissions impact of each of the millions of parcels transported every day; the company now offers customers the option of paying a bit extra for a 鈥渃arbon neutral鈥 delivery, providing carbon offsets based on the actual path and types of vehicles by which a parcel travels to its destination. The service adds about a nickel to the shipping cost per parcel.
Another example of product innovation comes from automaker BMW, which set up a sustainability team that quickly attracted some of the company鈥檚 leading engineers. They ended up designing what they say is the world鈥檚 first electric car designed for mass production from the ground up. While it may be years before the new division 鈥 dubbed 鈥淧roject i鈥 鈥 actually contributes to the company鈥檚 profits, BMW sees it as laying the groundwork for a leadership role in new automotive technology.
Sustainability turns out to have benefits for a company鈥檚 relations with its own employees as well, the study found. 鈥淚n terms of retention and recruitment, having sustainability present on your agenda really has some cachet,鈥 Kiron says, making it easier to attract and keep some of the most talented people.
Robert Eccles, a professor of management practice at Harvard Business School who was not involved in this study, says the MIT study 鈥渋s one that executives in companies in every industry all over the world should read, and it identifies many of the key issues that need to be addressed.鈥
Eccles also says the report鈥檚 findings are congruent with those of research he has conducted with colleagues at Harvard and at London Business School.
鈥淭he research I am doing with a number of collaborators strongly supports the findings of this survey,鈥 he says. 鈥淲e get similar results in contrasting 90 鈥榟igh sustainability鈥 companies with a matched set of 90 鈥榣ow sustainability鈥 ones. The high sustainability companies also have distinctly better financial performance over an 18-year period of time.鈥
But Eccles adds that in order to benefit corporate performance, sustainability must be paired with innovation. 鈥淲ithout innovation, simply committing to improve sustainability performance will likely detract from financial performance,鈥 he notes.
Eccles cautions that challenges remain in interpreting these findings: While savings in energy, water and resource use provide obvious benefits, he says, 鈥渢hese are easier to demonstrate and quantify than reputational and brand benefits.鈥 He adds, 鈥淲hile the article rightly notes that mainstream investors are becoming interested in sustainability, this is not yet a trend and the markets still have their traditional short-term view.鈥
Provided by Massachusetts Institute of Technology
This story is republished courtesy of MIT News (), a popular site that covers news about MIT research, innovation and teaching.