The convincing business case for sustainability is still proving elusive, a new report finds

One of the buzz topics in business management in the past few years has been how companies are “mainstreaming” sustainability: treating environmental and social issues as part of their “core” business, rather than just as public relations or corporate responsibility concerns.

The third annual study finds increasing commitment to sustainability, with two-thirds now saying a sustainability strategy is “necessary to be competitive”, up from 55% in 2010.

But not all the companies interviewed could rationalise their activities in straightforwardly business terms.

Companies increasingly see innovation and competitive advantage as drivers for sustainability, alongside longer-standing reasons like cost reduction and reputation, according to Ingrid von Streng Velken, global manager of BCG’s sustainability initiative.

But by no means is that true across the board. Only 31% of respondents said they are currently profiting from sustainability. And many still seem to be struggling to build a strong business case, indicating that companies are sometimes acting on faith, rather than copper-bottomed evidence. 

“If we look at commitment and the management attention from companies, it all increases,” Velken says. “But we don’t see a continuous increase in the number of companies who say they are building the business case. Even though they see the benefits, it’s still something many are struggling with.”

She adds: “Many find it hard to find the right measures to build a business case, they struggle with the technical challenge of evaluating sustainability investment. Some companies know they need to add a little faith into their calculations.”

Profits essential

It is tempting to think that if companies are doing the right thing, then a business case is secondary. But Velken says that would be short-sighted: the companies most likely to embrace sustainability long term are those that see a bottom-line benefit. Profitability, in other words, is key to sustainable sustainability.

The report says the companies profiting so far, dubbed “harvesters”, are likely to have people directly responsible in each business unit, and perhaps a chief sustainability officer as well. They are also incentivising employees, for example as part of performance reviews.

Harvesters are also good “collaborators”, working with suppliers, partners, government, and customers. Velken mentions Wal-Mart as one example of a company working closely with its suppliers on value chain impact. It also displays good knowledge management: spreading ideas that work in one part of the business to other units and locations.

The report overturns a couple of common assumptions about sustainability. One is that the economic uncertainty has cut companies’ appetite for environmental and social initiatives (68% said they were increasing it in 2011). The second is that Europe and the US lead the rest of the world in adopting sustainability. A majority of respondents thought European companies were leading, but in fact the most active companies are actually in Asia-Pacific.

Velken says that may be because Asia Pacific companies face higher levels of direct, visible pollution, and more tangible natural resource constraints.

The study is a little loose in defining “sustainability”, treating it as “economic sustainability”, as well as something to that is environmental and societal. In a sense though, that simply proves its point: that sustainability is important to do, but hard to pin down. Hopefully, in due course, companies, like the research, will do a better job.