A new study by researchers at Harvard Business School and London Business School concludes that companies which have voluntarily embraced a sustainable business culture over many years “significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.”

The study compares a portfolio of 90 “High Sustainability” organizations that have adopted a substantial number of environmental and social policies since the early to mid-1990s with a similar number of “Low Sustainability” companies that have adopted almost none of those policies.  Financial performance of the two groups is tracked for an 18-year period through the end of 2010.

“We document that sustainable firms are fundamentally different from their traditional counterparts with respect to their governance structure, the extent of stakeholder engagement, the extent of long-term orientation in corporate communications and investor base, and the measurement and disclosure of nonfinancial information and metrics,” the study says. “This is an important finding because it suggests that the adoption of these policies reflects a substantive part of corporate culture rather than purely greenwashing and cheap talk.”

The study – The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance – was authored by Robert G. Eccles, Professor of Management Practice at Harvard Business School; Ioannis Ioannou, Assistant Professor of Strategic and International Management at London Business School; and George Serafeim, Assistant Professor of Business Administration at Harvard Business School.

Performance Metrics

The authors report that an investment of $1 in the beginning of 1993 in a value-weighted portfolio of High Sustainability firms would have grown to $22.6 by the end of 2010, based on market prices.  In contrast, a similar investment in a value-weighted portfolio of Low Sustainability firms would have grown to only $15.4 by the end of 2010.

Using Return-on-Equity (ROE) accounting metrics, the study finds that an investment of $1 in the beginning of 1993 in book value of equity in a value-weighted portfolio of High Sustainability firms would have grown to $31.7 by the end of 2010, compared to only $25.7 for Low Sustainability firms.

Using Return-on-Assets (ROA) analysis, a $1 investment would have resulted in assets in a value-weighted portfolio of sustainable firms growing to $7.1 over an 18-year-period, compared to only $4.4 for a portfolio of traditional firms.

An equal-weighted portfolio of High Sustainability firms also outperformed a portfolio of traditional firms, according to the financial analysis.

Culture of Sustainability

At companies with sustainable business policies, the authors write, boards of director “are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics.”  In traditional firms, the study says, executive compensation based on short-term metrics “may push managers towards making decisions that deliver short-term performance at the expense of long-term value creation. Consequently, a short-term focus on creating value for shareholders alone may result in a failure to make the necessary strategic investments to ensure future profitability.”

“Firms in the High Sustainability group might outperform traditional firms because they are able to attract better human capital, establish more reliable supply chains, avoid conflicts and costly controversies with nearby communities, and engage in more product and process innovations in order to be competitive under the constraints that the corporate culture places on the organization,” the study says.

The study concludes:

Overall, we find evidence that firms in the High Sustainability group are able to significantly outperform their counterparts in the Low Sustainability group. This finding suggests that companies can adopt environmentally and socially responsible policies without sacrificing shareholder wealth. In fact, the opposite appears to be true: sustainable firms generate significantly higher profits and stock returns, suggesting that developing a corporate culture of sustainability may be a source of competitive advantage for a company in the long-run. A more engaged workforce, a secure license to operate, a more loyal and satisfied customer base, better relationships with stakeholders, greater transparency, a more collaborative community, and a better ability to innovate may all be contributing factors to this potentially persistent superior performance, even in the very long term.

In their final analysis, the authors pose several questions that are left unanswered: “What is the optimal degree of a culture of sustainability under various circumstances? Since sustainability involves tradeoffs, both across financial and nonfinancial objectives, and between nonfinancial objectives themselves, the firm cannot optimize across all of them. Choices need to be made.”   And, “since the choices a firm makes are dependent on the overall societal context, how will a culture of sustainability evolve as society evolves?”

Executives responsible for sustainability and corporate social responsibility (CSR) programs at large companies are overwhelmingly optimistic that those initiatives will be part of the “core strategies and operations” of global businesses in the next five years, according to a new survey.

Top sustainability and CSR priorities for those companies in the year ahead, the survey found, were human rights and workers’ rights, climate change, and the availability and quality of water on a global basis.

The survey was based on data from 498 professionals representing more than 300 member companies of BSR, a non-profit global membership and consulting organization that focuses on CSR and sustainability issues; some two-thirds of BSR members are large firms with annual revenue of $1 billion or more.  The results were released in San Francisco at the organization’s annual conference, with about 1,000 participants from more than 30 countries in attendance.

Despite a poor economy, large global businesses “are maintaining, if not extending, their commitments to sustainability,” said BSR President and CEO Aron Cramer.  According to Cramer, corporate managers are concluding that sustainability initiatives help cut costs and save money, particularly in environmental programs; drive “innovation” of new products and business models; and help to “future-proof” overall corporate strategy.

Executives polled in the survey said their biggest current leadership challenge is the integration of sustainability into core business functions.  While more than two-thirds reported that their companies’ communications functions (corporate communications and public affairs) were engaged in CSR/sustainability, far fewer reported engagement by critical operational functions such as investor relations (38%), human resources (37%) and finance (18%).

According to the survey, executives continue to acknowledge that the public does not have a high degree of trust in business, with only 2% sensing “a great deal of trust” from the public. To improve that situation, executives said, the two most important actions their companies should take are to “increase transparency of business practices” (55%) and “measure and demonstrate positive social and environmental impacts” (51%).

Among top subject area priorities, the survey found “a sizeable increase” in interest around water availability and quality over the past 12 months, with 54 percent noting it as a priority, up from 47 percent last year.  Other top priorities were human rights (65%), climate change (63%) and workers’ rights (61%).  BSR’s Mr. Cramer said increased interest in human rights and worker’s rights this year may have been driven by the release in July of the UN’s Guiding Principles on Business and Human Rights.

When asked to "rate your outlook regarding the extent to which global businesses will embrace CSR/sustainability as part of their core strategies and operations in the next five years," 22 percent of the executives said they were "very optimistic" and 62 percent "somewhat optimistic" that would happen.

It’s illogical – and quite myopic – that many of the nation’s largest institutional investors refer to shareholder-sponsored resolutions addressing material topics such as climate change, resource constraints and environmental stewardship as “special interest,” “non-routine” or involving “special circumstances.”

The opposite is in fact the case. We strongly agree with David Lubin and Daniel Esty’s contention in a recent Harvard Business Review article that sustainability is a core driver of competitive business strategies. Sustainability issues present both opportunities for competitive advantage and risks that, left unmanaged, will cause a company to lag its sector. If companies aren’t addressing sustainability they won’t be producing long-term value for their shareholders.

The financial numbers back this up: A review of 36 studies by Mercer Investment Consulting shows strong linkages between ESG (environmental, social and governance) integration and positive investment performance. “Eighty-six percent of the studies are neutral or positive,” Mercer’s Jane Ambachtsheer told the CalPERS Board of Directors in August.

With this in mind, Ceres recently unveiled the new and detailed Ceres Guidance: Proxy Voting for Sustainability to a Council of Institutional Investors breakfast in Boston. Our guidelines are a tool. But more importantly, they launch a serious effort to get mainstream investors moving now – immediately – to assert their prerogative, as part of their fiduciary duty, on these issues. Ceres, which coordinates the $10 trillion Investor Network on Climate Risk, has the partners in its network to leverage this initiative.

The guidance includes:

- Ceres’ set of Proxy Voting Sustainability Principles covering governance, social issues, environmental issues and general sustainability topics like “Management Accountability for Sustainability Goals” and “Adoption of Specific Environmental Performance Goals and Measurements.”

- Accompanying guidance on how to cast votes on particular sustainability resolutions. For example, when faced with a resolution that proposes independent directors, the guidance advises voting for this proposal applying the Proxy Voting Sustainability Principle of “Loyalty” to shareowners. When faced with a resolution calling for a link between executive compensation and sustainability performance, the guidance advises voting for this proposal applying its “Management Accountability for Sustainability Goals” principle.

- A compilation of sustainability resolutions from recent proxy seasons and the vote counts on these resolutions from the 2010 season. Surprising examples indicative of sustainability trends include a 60.7 percent vote at Sprint on a resolution requiring the company to account for both its direct and indirect political spending and a 53 percent vote requiring coal producer Massey Energy to set greenhouse gas emission reduction targets.

- A compilation of sample proxy voting guidelines already being used by leading investors around the world. Guideline language from big pension funds like Florida’s State Board of Administration on water scarcity and proxy access are highlighted next to guideline examples from the AFL-CIO on performance based equity compensation, TIAA-CREF on charitable contributions, SRI funds like PaxWorld on workplace health and safety and more.

Investors who adopt the Proxy Voting Sustainability Principles will be better positioned to vote consistently and responsibly on the 700-plus sustainability resolutions now being filed with US companies each year. They can adopt these principles as a policy to guide their proxy voting consultants or as a supplement to other proxy guidelines. Pensions funds and other asset owners can similarly press their asset managers to use these principles in voting their proxies. For those developing proxy guidelines for the first time, these principles can provide the framework for shaping a comprehensive set of corporate governance guidelines.

The resolutions are categorized so that investors can determine whether their existing proxy voting guidelines are sufficiently specific to create consistent voting outcomes on these resolutions. The list of common resolutions can also be used as a checklist for investors who wish to ensure that their existing or new proxy guidelines will comprehensively cover sustainability and governance issues arising in the future.

Lastly, and perhaps most importantly, the Ceres Guidance includes more than 75 leading examples of proxy guidelines that asset owners and asset managers can consider as they re-visit their own guidelines and policies. The sample language from public pension funds, asset managers, socially responsible investment funds, labor unions, and foundations covers key sustainability topics such as climate change, water availability, broad environmental risks, ESG-driven executive compensation and board of director governance.

Our message to asset managers, asset owners and voting fiduciaries who have yet to incorporate specific mention of the various sustainability issues into their proxy voting guidelines is clear: Now is the moment to act. You cannot defer to the opinion of specific management bodies in deciding how to vote on issues that will help determine business success or failure and significantly impact long-term value creation in the coming years.

And if you fail to specifically address these issues in your guidelines, you run a serious risk of breaching your fiduciary duty by voting inconsistently or failing to vote on resolutions of critical importance to the companies you own and the shareholders or beneficiaries to whom you owe your fiduciary duty.

Sustainability will not wait. Climate change, water constraints, human rights and labor issues, new rules for corporate behavior or for governance and stakeholder treatment will simply not be ignored in a globalized economy where environmental, economic and social developments move at lightning speed – along with news of corporate failure and its attendant bottom-line and reputational damage.

The opportunity to promote key governance and sustainability reforms at large public companies – including reforms that might have helped avert the ongoing financial crisis – is a key competitive opportunity for those with their eyes open. Investors are increasingly watching – the rise in both the number and vote percentages of recent sustainability resolutions is testament to that. With our new guidance we’re confident they’ll be watching even more.

Kirsten Spalding is the California Director for Ceres. She works with members of the Investor Network on Climate Risk on their initiatives and represents Ceres on the West Coast for all Ceres programs.  Prior to joining Ceres, she served as Chief Deputy Treasurer under California Treasurer Phil Angelides and Director of the Treasurer’s environmental financing authorities.

This article was first published on the Harvard Law School Forum on Corporate Governance and Financial Regulation and is re-published with the author's permission.

One of my ongoing professional amusements involves what I call “The Name Game” – trying to reach agreement with colleagues on what to call the field in which we work.

Michael Porter

Corporate Social Responsibility (CSR) is the longest-standing and still most commonly used term, certainly on a global basis.  For lots of reasons, I prefer a variant of that: Corporate Responsibility.  Still other colleagues, especially in the U.S., embrace Corporate Citizenship.  Sustainability has gained in popularity in recent years.  And then there’s ESG – representing Environmental, Social and Governance issues.

New terms, and variations of existing terms, emerge with regularity.  Individuals and organizations embrace a particular definition because that definition suits their unique culture and goals.

Most terms, however, have one thing in common.  They hold that business and societal interests are not mutually exclusive; in broad terms, what’s good for society is good for business.  Therefore, business has a vested interest in addressing society’s challenges.

You might call it “shared value” – in fact, that’s exactly the term coined and suggested by Harvard Business School professor Michael Porter and Mark Kramer, co-founder with Porter of the FSG social impact consulting firm.

In the cover story of the current issue of the Harvard Business Review – The Big Idea: Creating Shared Value - Porter and Kramer urge business leaders to recognize that shared value is not "about ‘sharing’ the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value.”

Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a “social responsibility” mind-set in which societal issues are at the periphery, not the core.

The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.

Porter and Kramer first addressed the theme of “shared value” in a December 2006 article in the Harvard Business Review, Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility.

In their current article, Porter and Kramaer say there are three distinct ways to create shared value: “by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations.”

“The concept of shared value resets the boundaries of capitalism,” they write. “By better connecting companies’ success with societal improvement, it opens up many ways to serve new needs, gain efficiency, create differentiation, and expand markets.”

Companies employing shared value strategies, according to the authors, include Unilever, Nestlé, Walmart, GE and Johnson & Johnson.

Shared value is a provocative take on what’s happening – and, more importantly, what could happen – when the interests of business and society are aligned.  Porter and Kramer’s article probably won’t resolve the perennial corporate responsibility “Name Game” question, but it is a challenging and valuable analysis, well worth the read.

Photo courtesy of the World Economic Forum.

This article was first published on January 12, 2011.

Requiring that companies report on their environmental, social and governance (ESG) initiatives leads to broad improvement in socially responsible management practices, according to new academic research.

A working paper based on the research - The Consequences of Mandatory Corporate Sustainability Reporting by Ioannis Ioannou of the London Business School and George Serafeim of the Harvard Business School – concludes “that sustainability reporting not only increases transparency but can also change corporate behavior.”

According to the researchers, “mandatory disclosure of sustainability information leads to a) an increase in the social responsibility of business leaders, b) a prioritization of sustainable development, c) a prioritization of employee training, d) more efficient supervision of managers by boards of directors, e) an increase in the implementation of ethical practices by firms, e) a decrease in bribery and corruption, and f) an improvement of managerial credibility within society.”

The researchers applied an econometric model to data from 58 countries regarding laws and regulations that mandate a minimum level of disclosure on environmental, social, and governance matters. These ranged from the Sarbanes-Oxley Act in the U.S. to the King Code of Governance Principles for South Africa.

The paper notes a widespread increase in reporting of non-financial information, mostly on a voluntary basis, over the last decade.  According to the Global Reporting Initiative (GRI), only 44 firms followed GRI guidelines to report sustainability information in 2000. By 2010, the number of organizations releasing sustainability reports grew to 1,973.

“Disclosure of ESG information forces companies to manage these matters effectively in order to avoid having to disclose bad ESG performance to their multiple stakeholders,” the working paper states.

“To our knowledge, this study is the first to show that mandatory sustainability reporting may effectively promote socially responsible management practices and may improve perceptions of corporate social responsibility by stakeholders,” the researchers write. “These results are potentially economically important because socially responsible managerial practices could enhance the competitiveness of a country by generating higher levels of trust in business and its leaders.”

The working paper concludes: “An implication for regulators is that if they want companies to perform better on ESG metrics then reporting could be a useful means to achieve this objective. An implication for companies is that reporting could change the way they conduct business. If better ESG performance provides a competitive advantage and leads to higher economic value, as it has been argued…then reporting could enhance the economic value produced by a firm.”

This article was first published on April 27, 2011.

Dear EarthTalk: I'm looking for the best places to search for green jobs but am having trouble locating them on traditional job search sites. Where should I look? -- H. Jenkins, Biloxi, MS

With the environment now high atop the public agenda, green jobs are more popular than ever. Defined by eco.org (a leading green jobs website) as any job in any company where the primary focus is on reducing the impacts of our activities or products on the environment, green jobs serve to maximize efficient use of resources while minimizing degradation of the planet from pollution and waste. “Eco-jobs can range from engineering a photovoltaic solar cell to designing a building for more energy efficiency to landscaping a yard to minimize erosion to finding more sustainable forestry techniques,” reports eco.org.

While you may be hard pressed to find environmental job opportunities on general employment search websites, sites like eco.org that specialize in green job listings can make your search easy. Also, many general environmental sites have employment sub-sections. Green job seekers and employers alike use these websites to find each other and get their work done, whether in the non-profit or for-profit worlds.

Eco.org prides itself on hosting a wide range of listings from colleges, environmental and other nonprofit groups, media outlets and government agencies. With Google and Bing listing the site first for the search term “eco,” the website generates hundreds of thousands of page visits per month from thousands of green job seekers and employers, and also keeps its audience engaged through social networking.

Another leader in the field is the nonprofit Green Jobs Network, which provides online services including a green job board and a 20,000 member group on the professional networking site LinkedIn. The group also uses its GreenJobs.net website as a platform for webinars, and is the home of the frequently updated Green Collar Blog, which provides career resources and information on the green jobs sector.

Environmental Career Opportunities (ecojobs.com) is another tried and true source for green job listings. Some 50,000 targeted job seekers subscribe to the company’s bi-weekly newsletter that contains unique green job opportunities. Still other places to look for green jobs include EcoEmploy.com and the Environmental Career Center.

Another site, Greenjobs.com, focuses on job opportunities specifically in the renewable energy sector. Jobseekers can use the website to apply for jobs, post their resume, obtain guidance on finding and applying for jobs, gain background information on the renewable energy sector, and access a directory of relevant companies and organizations. Employers can take advantage of the firm’s recruitment services.

Browsing job listings at other more general environmental websites could also turn up that perfect opportunity. SustainableBusiness.com and the U.S. Green Building Council feature extensive green job listings as sub-sections of their websites. And yet another way to find a green job is to sniff around the website of a company, organization or institution in your field of interest for specific job listings—or better yet, call them on the phone to find out if there are any openings.

EarthTalk® is written and edited by Roddy Scheer and Doug Moss and is a registered trademark of E - The Environmental Magazine (www.emagazine.com). Send questions to: earthtalk@emagazine.com. Subscribe: www.emagazine.com/subscribe. Free Trial Issue: www.emagazine.com/trial.

I have been working in corporate citizenship for two decades, so I have seen the good, the bad the ugly – and learned a lot on the way. Here’s my top ten list of observations to pass on based on McDonald’s own journey thus far:

1. Create a CSR strategic framework
Society was much simpler, from 1955, when McDonald’s was first established, to the late 1980s. We built the “trust bank” by being community leaders, giving back, and having programs that were fun and engaging for our customers.

Then came the late 1980s and 1990s. Society changed and the Internet became a force of nature. McDonald’s was under attack by activists who thought we created too much garbage, hurt the planet, and exemplified the perceived evils of globalization.

By 2000, we learned we couldn’t be reactive anymore. We needed to play offense and get strategic with our CSR efforts. We created several governance bodies and structured processes to help us identify, manage and progress on a variety of social and environmental issues in a strategic manner.

Currently, we have six areas of focus. We are a food business, so nutrition and sustainable supply chain are important. People fuel our business, so people and community are also priorities. Then there is our responsibility to the environment. And at the core of everything we do is a commitment to sound governance and ethics.

2. Sustainability isn’t an initiative
CSR is not a program, initiative or function, but a mindset that is incorporated into every aspect of business planning and operations. At McDonald’s, this comes quite naturally because our values are at the core of everything we do and from the beginning we’ve been committed to doing the right thing. Our founder, Ray Kroc, said, “If we treat our customers right, take care of our franchisees, and always do the right thing—then we will make money and profit.” To me, this statement is equitable to a definition of CSR. If you live and put your values into practice every day, you will end up being a sustainable organization.

3. CSR starts at the top
CSR has to be driven by the top boss and senior management. Otherwise, CSR is peripheral and subject to measures of convenience. Management needs to integrate, allocate the necessary resources, and have it placed in strategic plans. Jim Skinner is our current CEO. He has led a tremendous turnaround over the past seven years. And his leadership on CSR is strong and unwavering. He put CSR right into our business plan. We call it our Plan to Win. Smack dab in the middle it says, “We are going to be a socially responsible company.”

4. Aim for the Smart Zone
It is a real stereotype to think that being socially responsible is a high cost. If you control your own strategies, most CSR efforts bring forth efficiencies, measures that use less resources, or bring a connection or relevance to consumers.

So aim for the Smart Zone. Merely following the law and regulations will merely make you a follower. The sweet spot is staying ahead, but staying smart at the same time.

For example, we have our big suppliers report their environmental performance – the amount of energy, water, and waste produced per pound of product sold to us on an annual basis. We do this so that we can work with them on continuous improvement, but we also initiated this for cost saving reasons. Less energy, water and waste should equals lower cost of production – and we are seeing that in the results.

5. Anticipate and manage emerging issues
No one likes to manage a crisis, so the idea is to stay to ahead of the curve and identify the issue when it is just starting to emerge, in academic studies or from NGO initiatives. This is easier said than done. My experience in business tells me that most business leaders are focused on the here and now or the very near future. However, waiting is a mistake. When you do, you lose control and end up being pushed into a reactive position, and that is never a good thing in business.

6. Manage the open and transparent society
With the power of the Internet, there is now a very radical transparency. People can get information and use this publicly in a matter of seconds. Take this seriously and dedicate resources to providing good and accurate information to as many stakeholders as you can.

7. Manage your planet footprint
We see managing our footprint as a business necessity to ensure we will have the resources we need to be in business well into the future. Good science tells us that we are straining our natural resources. Some estimates say that it will take ten more Earths to supply the needs of the population in just 40 years. We only have one Earth, and we all need to remember that.

8. Get engaged; don’t operate in an island
Smart companies develop a sophisticated stakeholder engagement plan that includes experts, NGOs, customers, media and others who can provide expertise and credibility. At McDonald’s, we’ve worked with a range of outside stakeholders over the years – Environmental Defense Fund, Conservation International, Greenpeace and others – to develop policies and programs that can improve our social, environmental AND business performance.

9. Manage CSR globally
CSR is not the same in every country. What is important to the U.S. is different from Australia, China is different than Brazil. So CSR efforts need to be decentralized in a global enterprise. The values come from the top, but the strategies and tactics will vary in the various geographic operations.

10. Tell your story, but humbly
Lastly, and a lesson we are still learning at McDonald’s, is to tell your story, but do so in a humble way. People want to know two aspects of your business when it comes to telling your story:

The first is obvious: What are you doing? What programs and progress are you making to be a responsible company?

The second is not obvious, and most often ignored by companies. It is all about HOW you are trying to be a responsible and sustainable organization. How are you engaging with society? How are you overcoming barriers and challenges? How are you testing new ideas?

Communicate in equal doses, both the WHAT and the HOW.

Bob Langert is Vice President, Corporate Social Responsibility for McDonald's. His responsibilities with McDonald’s include social responsibility efforts, including McDonald’s social responsibility reporting; global environmental management systems and issues; global supply chain issues (e.g., sustainable agriculture, biotechnology, animal agricultural and animal welfare programs); issues management; and part of McDonald’s “Balanced, Active Lifestyles” team.

This article was first published on the web site of the Boston College Center for Corporate Citizenship.

For most companies, that which drives up their stock values is what ultimately matters. And adopting ‘sustainability’ practices can do that. A study of the ‘Global 100 Most Sustainable Corporations’ as determined by Corporate Knights Magazine found that, “from… February 1 2005, the Global 100 Most Sustainable Corporations has achieved a total return of 54.95 per cent, outperforming its benchmark (the MSCI All Country World Index) by more than 16 per cent to December 31st, 2010.”

And US companies who are proactive concerning their environmental practices are found to have a lower cost of debt, says a study by Rob Bauer and Daniel Hann of Maastricht University, Netherlands, published December 23, 2010. (The study won the respected 2010 Moskowitz Prize for Socially Responsible Investing, offered by the Haas School of Business at the University of California.)

Whether most executives are aware or not of such results—and probably most are not—they are nevertheless advocating and implementing sustainability programs for their companies around the world. A KPMG International study of executives released April 18 said that, “nearly 55 per cent of US executives say their organization has a formal sustainability strategy in place… Another 12 per cent say they are working on a strategy and an additional 19 percent expect to eventually develop a formal plan… Asked to identify the top three benefits from their sustainability program, the respondents most often chose: better or more efficient business processes and practices; increased profitability or shareholder value; and the ability to attract or retain new or existing customers… ”

Interest in sustainability related issues is growing in companies everywhere. As an example, in the Middle East, a survey published in July 2010 by Sustainability Advisory Group found over 80 per cent of executives in that region proclaimed issues related to sustainability were critical or important to their organization in the next ten years.

So what are companies really doing in regard to sustainability? The London based firm, SustainAbility, publishes a highly regarded ranking of global companies and their sustainability efforts. The highest ranked firms for 2011 were Unilever, General Electric, Interface, Wal-Mart and Marks & Spencer. An outline of their sustainability accomplishments is given below.

Apparently, Unilever, which manufactures food, ice creams, soaps, shampoos and everyday household care products, and more, scored highly partly because of its Sustainable Living Plan. The plan, Unilever says, contains over “50 concrete targets that will: help more than one billion people improve their health and well-being; halve the environmental impact of our products; [and] source 100 per cent of our agricultural raw materials sustainably.” Specifically, “By 2020 we aim to halve the greenhouse gas impact of our products across the lifecycle – from the sourcing of raw materials, through to consumer use and disposal… to halve the water associated with the consumer use of our products… to halve the waste associated with the disposal of our products... Today we source 10 per cent of our agricultural raw materials sustainably. By 2012 we will source 30 per cent; by 2015 50 per cent; and by 2020 100 per cent.”

General Electric (GE) has its ‘ecomagination’ group. Ecomagination products include aircraft engines, locomotives, and wind turbines. GE says, “We launched ecomagination in 2005. We’ve succeeded by embracing the world’s environmental issues as an enormous business opportunity… Overall, in the first 5 years, we invested $5 billion in clean tech R&D, and we generated $70 billion in ecomagination revenues… As for our own opera¬tions, we committed to reduce our environmental footprint and, in 2009, our greenhouse gas emissions were down 22 percent compared to 2004, well ahead of our goal.” GE also claims that since 2005 they have reduced water consumption by 25 per cent and attained a 50 per cent reduction in energy intensity.

US headquartered Interface is the world’s largest manufacturer of modular carpet (carpet ‘tiles’). The company says its vision is, “to be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits.” Ray C. Anderson is founder and chairman of Interface and on November 9, 2010, he wrote on GreenBiz.com that, “We are now 10 years from 2020, our target year for achieving zero [environmental] footprint... at the end of 2009, we were about 60 per cent of the way.” (A zero environmental footprint suggests, on a net basis, making zero demands on the earth’s resources.)

It seems that Ray Anderson of Interface may have provided some inspiration for Wal-Mart to also jump into sustainability. At the instigation of Wal-Mart’s CEO, Mr Anderson addressed Wal-Mart executives at a meeting on sustainability in 2004. In October 2005 Lee Scott, CEO called for Wal-Mart, “ …to be supplied 100 percent by renewable energy, to create zero waste and to sell products that sustain our environment and resources.” A major recent innovation in this regard is Wal-Mart’s pioneering of a product ‘sustainability index.’ The company says that, “with this initiative [the sustainability index], we are helping create a more transparent supply chain, accelerate the adoption of best practices and drive product innovation and ultimately providing our customers with information they need to assess products’ sustainability.”

Marks & Spencer (M&S) is the renowned UK supermarket/department store chain. It plans to become the world’s most sustainable retailer by 2015. In its How We Do Business 2010 report, M&S says that since 2007 they have “cut carbon emissions from our operations by 8 per cent... improved store energy efficiency by 19 per cent (after weather adjustment); reduced the amount of waste sent to landfill by 33 per cent; reduced the average weight of non-glass packaging on General Merchandise by 36 per cent and Food by 20 per cent per item… used 400 million fewer carrier bags than in 2006/07; increased sustainably sourced wood to over 70 per cent and sustainable fish to over 60 per cent... [and] become the UK’s largest retailer of Fairtrade certified cotton clothing and helped our suppliers set up 10 Ethical Model Factories.”

Thus, corporations adopting sustainable initiatives are likely to save costs, and may even drive revenues and profits higher. And they might enjoy broader stock market recognition for their sustainability, which could boost their stock prices as well!

Ron Robins is Founder and Analyst at the website Investing for the Soul and a financial and economics columnist for alrroya.com, a leading Middle Eastern business portal/publication.

This article is reprinted with permission.  Copyright alrroya.com.

No, I don't mean green as in money.  I mean green as in environment. At Kimberly-Clark, sustainability is not only discussed in the C-suite; it's also on the board of directors' agenda. At the Corporate Eco Forum (CEF) annual meeting held last week, Kimberly-Clark announced its Sustainability 2015 goals built on a framework of People, Planet and Products. Suhas Apte, Vice President, Global Sustainability, shared with me his experience in presenting the plan to the K-C board of directors and their feedback.

K-C's 2015 plan "commits to reducing the company's environmental footprint, building healthy work environments, innovating products and business models to reach new consumers globally, focusing K-C's social programs on global issues and in the company's communities, and addressing broader global commitments such as the U.N Millenium Development goals." The company has also released metrics that the company will measure and track related to these goals.

Apte told me that not only did the board endorse the plan, but the board asked how the plan could be accelerated. Under the leadership of K-C Chairman and CEO Thomas J. Falk, the board asked Apte for an annual review including discussions of longer-term aspirations, impediments, and ways in which the board can help. K-C also has an external advisory board for sustainability that meets with the company's C-suite executives twice a year to ensure that K-C is fully engaged in current thinking and discuss "what K-C should be worried about."

Apte defines the full scope of the company's interests in terms of sustainability. "K-C is not only looking at the supply chain - looking backwards at sourcing, procurement, design, and manufacturing," explained Apte, "but we are also interested in matters of safety and environment after our goods are produced. We define the entire continuum as the 'value chain,' thereby including marketing/selling and also disposal."

The business case

"Our tissues and paper towels are manufactured from trees and water, and our super absorbent materials are made from oil based polymers. It's in our company's interest to make sure that essential resources are available to the company well beyond 2015," explained Apte.

Furthermore, the younger generation of employees understand sustainability, so in order to attract the best talent, and engage the people who will be our future leaders, our company needs to be at the forefront.

Apte said that Sustainability 2015 is the "Right to Play" plan, ensuring that K-C has an opportunity to stay in the game with the resources it will need. The next sustainability plan for the board will be the "Right to Win," defining how K-C will gain the long-term advantage.

When the board of directors recognizes that sustainability is not only essential to the company's future, but also the key to the company's competitive advantage, then the company wins. So does the world.

Alice Korngold is CEO of Korngold Consulting LLC and a blogger for Fast Company, where this article was first published.  She has been a consultant to global corporations on CSR, training and the placement of business executives on nonprofit boards for 20 years. She also consults to nonprofit/NGO boards.

Which Fortune 500 companies have the best records for reducing greenhouse gas emissions?  Which have noteworthy policies and practices for preventing human rights abuses in their supply chain?  Which have outstanding records for encouraging employee diversity?   And which companies constitute the 10 best in the world for overall sustainable business practices?

Those types of questions are being asked more frequently these days by a growing number of consumers, investors and regulators. Problem is, depending on which sustainability ratings list you consult for information, answers to the questions can vary dramatically.

Citing the “continued confusion, uneven quality and opacity” of proliferating ratings for corporate sustainability programs, a new non-profit initiative has been launched to develop a generally-accepted “framework” for sustainability ratings worldwide.

Plans for the Global Initiative for Sustainability Ratings (GISR) were announced by Ceres, an investor and environmental organization, and the Tellus Institute, a Boston-based research organization.

“GISR is a global non-profit, mission-driven program aimed at moving markets to the advantage of true sustainability leaders,” the organizations said. “It seeks to achieve for sustainability ratings what the Global Reporting Initiative (GRI) strives to achieve for sustainability reporting, namely, creation and continuous enhancement of a framework that is designed and managed as a public good to advance the global sustainability agenda.”

The initiative seeks to bring some order to the burgeoning industry of corporate sustainability ratings, which includes market indices (such as the Dow Jones Sustainability Indexes and FTSE4Good Index Series), mainstream media listings (Newsweek’s Green Rankings and Fortune’s Most Admired Companies) as well as long-standing social investor rankings (the KLD 400 Social Index) and other sustainability lists.

An October 2010 report by the consultancy SustainAbility examined 108 different ratings systems – of which only 21 existed in 2000.

According to the SustainAbility report, a “growing number of companies are linking executive compensation to performance on ratings. Major mainstream asset managers are examining company sustainability performance as part of their investment decision making. And, slowly but surely, citizens and consumers are starting to wake up to these issues and are turning to ratings for actionable information. While these are all welcome developments, increased attention means ratings must be able to demonstrate that they are fair, accurate and credible.”

In announcing the GISR initiative (PDF), Ceres and Tellus said the potential of sustainability ratings “has been hampered by the proliferation of the field into scores of raters each with its own, usually proprietary, methodology; lack of transparency regarding the structure and implementation of methodologies; uneven coverage of key, material sustainability issues; inefficiencies and survey fatigue on the part of rated organizations; and, in some instances, conflicts of interest whereby raters play multiple roles in their relationship with rated organizations.”

Its organizers said GISR will work "to bring coherence, transparency and coordination to sustainability ratings" by designing a generally-accepted framework that:

• Accelerates the infusion of sustainability content – initially in public equities and later in bonds, real estate and other asset classes – into mainstream financial ratings;
• Moves existing sustainability ratings toward a core set of principles and process/performance content;
• Serves as a stand-alone, dynamic framework for ratings users.

Ceres and the Tellus Institute said they are the “principal conveners” of GISR but will be working with various partner and collaborating organizations.  “In its initial phase spanning approximately 18 months, a multistakeholder Steering Committee will oversee GISR,” they said.

GISR’s schedule calls for a beta version of its sustainability ratings framework about 12 months after launch and a Version 1.0 approximately 18 months after launch.

“GISR’s overarching goal is to bring sustainability ratings into the mainstream,” the organizers said. “This will occur through uptake by pension funds in RFPs, investment managers in portfolio decisions, government agencies in procurement initiatives and NGOs in advocacy and partnership initiatives. Over time, through a process of convergence and integration, we believe all ratings—financial or otherwise— across all asset classes should be infused with sustainability content.”