New Survey: CEOs See Sustainability Shifting From Choice To Corporate Priority
Yesterday, the United Nations Global Compact (UNGC) and consulting firm Accenture released findings of a comprehensive survey that addresses every stakeholder in the market, i.e., employees, consumers, recruiters, executives, students, entrepreneurs, nonprofits as well as government regulators and advocates. The survey population: 766 CEOs from leading global companies (156 from North America), with the largest representation from the "Professional Services" industry (18%) followed by consumer products at 14%.
Titled "A New Era of Sustainability: CEO reflections on progress to date, challenges ahead and the impact of the journey toward a sustainable economy," the survey focused on three questions:1) Sustainability is changing—how is your company addressing it?
2) Next step: Taking it from strategy to execution; and
3) What's ahead: Competing in an era of sustainability
2) Next step: Taking it from strategy to execution; and
3) What's ahead: Competing in an era of sustainability
Sustainability is Changing
The survey begins with a magnifying glass: How important are sustainability issues to the success of your business? While a majority of the respondents stressed the importance of sustainability, an overwhelming 93% highlighted how critical sustainability issues would be going forward. Representing companies like Alcatel-Lucent, Diageo, GlaxoSmithKline, HSBC Holdings, National Grid, Unilever, Novartis, Goldman Sachs, PepsiCo and Timberland, the surveyed CEOs emphasize that the downturn counter-intuitively gave them the opportunity to assess how their sustainability initiatives "deliver core business value like cost reduction and revenue growth." To break it down (see graph below for a breakdown by industry):
- Economic downturn raised importance of sustainability as an issue for top management: 80%
- Company reduced investment in sustainability as a result of the downturn: 12%
- The downturn led company to align sustainability more closely with core business: 74%
So far, so good. With the importance of sustainability seemingly established, the survey next asks what really drives this new priortization at companies, i.e., What factors, have driven you, as a CEO, to take action on sustainability issues? I'll admit at the sake of naivete, that I had hoped for different answers—with that many CEOs emphasizing corporate sustainability as a priority for them, why wouldn’t one?
While a resounding majority cite brand, trust and reputation as the No. 1 reason (72%), potential for revenue growth (44%) and personal motivation (42%) come in the second and third spots. And 31% cite employee engagement and recruitment as their main motivation.
Next step: From strategy to execution
While the survey goes deeper into the question of trust, asking CEOs how they perceive trust for their company as well as industry, it targets action plans next. This is the section of the survey that exemplifies best how sustainability is moving from a choice to becoming a corporate priority. The report states:
The widespread perception of the increased importance of sustainability may reflect a new appreciation of the scale and complexity of global challenges facing business today. As issues of climate change and the natural environment, social development and global corporate governance become ever more pressing, CEOs are acutely conscious of the challenges ahead. These challenges have a direct impact on companies’ operations, but also demonstrate the role business must play in addressing the demands of the new century. As one emerging market CEO told us, “Sustainable development will be a basic guarantee for our company’s survival and growth.”
The survey also highlights a wide disconnect that remains even today between the perceived importance of environmental, social and corporate governance for companies and how these play out in their own business strategies. Or as the report puts it, "while the belief in the strategic importance of sustainability issues is widespread among CEOs, executives continue to struggle to approach them as part and parcel of core business strategy." For example, take a look at the two graphs below. In response to whether these issues should be fully embedded into the strategy and operations of a company, 96% of them "agree" or "strongly agree." However, when asked whether this was true for their company, the percentage drops to 81%. Although a comparison with 2007 results shows an increase of 31% in the number of CEOs who agree that sustainability is embedded in their companies.
What's ahead: Competing in an era of sustainability
Again, while acknowledging the importance of sustainability seems widespread among executive suites, marketplace complexities continue to present challenges. Asked how long it would take for sustainability to be fully embedded within the core business strategies for a majority of companies globally, there was no clear consensus with 44% predicting 5-10 years, 26% opting for 10-15 years and only 10% picking the next five years.
That the survey went beyond the statistical findings to illustrate what this marketplace might look like is worth noting. Some of the highlighted points included:
- A broader sense of what value creation means to society;
- More effective use of technology toward driving transparency and resource efficiency;
- More effective business practices to tackle different consumer needs as well as alternative supply chains; and
- (Perhaps most importantly) Sustainability leadership and culture that embeds CSR into how employees and executives think about strategy and execution. At Vault and through our CSR blog: In Good Company, this has been at the heart of a ongoing discussion with educationists [How Will Wall Street Shortcomings Redefine the MBA Curriculum?], students [Will an MBA in Sustainable Business Get Me a Job?] and professionals [Kathrin Winkler, Chief Sustainability Officer at EMC].
The report concludes that while CEOs see a final destination for connecting sustainability and their businesses, the methods and timeline to get there remain uncertain. Some of the proposed action points include:
- Generating new knowledge, skills and mindsets to drive sustainable development.
- Corporate training in sustainability.
- Attracting and engaging employees.
- Leading to an investment environment more favorable to sustainable businesses.
- Embedding new concepts of value and performance at the organizational and individual levels.
Not surprisingly, this puts the onus on companies to develop talented human capital that is vigilant, aware and cognizant of pursuing a successful career at a company that aligns with their values and commitments. This has already begun to emerge as the greatest challenge for corporate America. Or an advantage, if you choose to recognize it as one.
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