The Growth of Corporate Sustainability in 2012

Powerful forces are aligning to drive corporate sustainability in 2012. Companies are eliminating waste and diminishing greenhouse gas emissions due to the realization that the pursuit of environmental benefits yields material results. More companies than ever are creating economic value from enhanced social and environmental outcomes.

Many drivers are pushing corporate sustainability forward in 2012

A recent study by Green Research titled Annual Sustainability Executive Survey, 2012, found that corporate sustainability spending will significantly increase over the next year. Almost 33 percent of the companies surveyed are adding staff to their sustainability departments, and 50 percent will increase spending on company-wide sustainability initiatives. A total of 25 percent of the companies surveyed said they are planning to increase the budgets of their sustainability departments.

Sustainability is fast becoming a core component of corporate practices. As Carl Rush, Senior Vice President of Organic Growth at Waste Management, explained to Greenbiz, sustainability is increasingly an integral part of business.

“I think we will continue to see an evolution in how companies view sustainability -- as an integral part of their business strategy to reduce risk, improve their supply chain and address their customers' needs and expectations.”

Corporate Leadership

Sustainability_thumb.pngEven in the absence of new legislation, corporations are seeing the value of leading the sustainability revolution. Peter Malik, the Director of the Center for Market Innovation at the Natural Resources Defense Council expects sustainability to keep growing with or without government.

“The world is changing…There is plenty of everything in the ground, but it will get increasingly expensive to get at it. This will drive sustainability even in the absence of any sensible government behavior.”

It is in the best interest of companies to be sustainability leaders; they can not afford to wait for legislation to act. This view is reflected in the remarks of Neil Hawkins, Vice President of Sustainability and Environment, Health & Safety, Dow Chemical Company:

"Companies will continue to move beyond sustainability as an obligation driven by outside forces. They will uncover more tangible economic value that drives both top and bottom line growth. But they'll need to get ahead of the curve in order to do that."

As explained by Rick Fedrizzi, President and CEO of the U.S. Green Building Council, engaging sustainability is no longer a choice, it is an economic imperative. Fedrizzi was quoted as saying:

"In the last 10 years, the impetus behind building green has shifted from being a good thing to do to a necessary thing to do. And the bottom line drives many of these decisions and making performance-driven choices of utmost importance.”

Consumer Activism

The burgeoning awareness and popular activism that we saw in 2011 will continue in 2012. The fact that consumers are demanding more responsible product offerings represents a dramatic shift in consumer behavior that will impact business, marketing, and society at large.

Popular activism aided by the ongoing proliferation of social media is driving consumers to demand that the private sector become more socially responsible. The public's access to digital media like mobile apps gives them unprecedented power. Adam Mott, Corporate Sustainability Manager at North Face, lists consumer demand at the forefront of forces driving sustainability.

“For most companies, [sustainability initiatives will be driven by] some combination of consumer demand, potential financial savings, constrained resources, regulatory requirements, long term business viability and company values.”

Consumers want companies to behave in a more responsible fashion. This point was born out in research by Edelman, the world’s largest PR firm. They discovered that 86 percent of global consumers want companies to put society’s needs on the same level as their business needs.

Businesses understand that to be competitive they must respond to these changing consumer attitudes. Corporations that respond to consumer demands for greater responsibility are being rewarded by increased levels of trust and enhanced customer loyalty. As stated by Kathrin P. Belliveau, Esq., Vice President, Corporate Responsibility and Government Affairs at Hasbro:

"Earning the trust of the children and families who enjoy our brands is extremely important and a driver behind all that we do. We hope that by providing transparency into our CSR goals and journey, it will give consumers added incentive to choose our products."

Employee Engagement

Engagement in sustainability also offers significant returns within an organization. In addition to advancing a company's sustainability initiatives, these efforts can improve recruitment and retention. The Green Research study found that employee engagement is a central part of corporate sustainability initiatives in 2012. The research revealed that 80% of major corporations are planning to invest significantly in employee engagement.

Employee engagement is important to companies like Molsen Coors, as stated by Bart Alexander, the company’s Chief Corporate Responsibility Officer:

"In our annual employee survey, almost nine out of 10 employees believe that we are environmentally responsible and responsible in the community. And these beliefs are one of the top drivers of their engagement. Our employees reflect the wider community: Consumers care about the company behind the brand."

Technological Innovation 

Technological innovations are a powerful tool driving corporate sustainability. According to Eric Dresselhuys, Executive Vice President of Silver Spring Networks:

"The biggest driver [or corporate sustainability] will be a combination of policy and technology. There are great technologies coming onto the market as the result of the investments made over the last three to five years. They are commercially available and are proven to deliver value."

Sophisticated software is making it easier for corporations to engage sustainability strategies. Software solutions have been developed that help to manage environmental impacts. Groom Energy predicts this type of software will increase 300 percent in 2012, while Pike Research says global expenditure for carbon accounting software and carbon management services will grow from $705 million in 2010 to $5.7 billion by 2017.

The level of new technology adoption will keep increasing as inter-operability and cloud computing become new IT standards. As explained by Chris King, Chief Regulatory Officer, at eMeter, these new technologies will be a powerful tool in the sustainability efforts of utilities.

“Technology will drive us forward to Smart Grid 2.0. We’ll see utilities adding data analytics software to plumb the rivers of data now pouring in from over 150 million smart meters globally, to operate more efficiently and reliably. We’ll see consumers getting new options for dynamic pricing, detailed usage information options, and prepayment from upgraded utility IT systems – and they’ll be able to purchase exciting new energy management devices, especially smart thermostats like those offered by Nest Labs, Tendril, EnergyHub, Control4, and others, from utilities and retailers, including Best Buy.”

Shareholder Demands

Corporate sustainability initiatives are increasingly motivated by the environmental concerns of shareholders. Investors are demanding that corporations manage risk through responsible sourcing of commodities and adopting more sustainable practices.

As reported by Ceres, the 2011 shareholder proxy season saw a record 109 shareholder resolutions filed with 81 U.S. and Canadian companies on climate change, unconventional fossil fuel production and related sustainability risks.

A study from Brighter Planet revealed that shareholder pressure is one of the fastest growing catalysts for sustainability initiatives. Another study by Ernst & Young found that there was a 40% year-over-year growth rate in sustainability shareholder resolutions and the same researchers predicted that fully half of all shareholder resolutions will be sustainability-related.

More companies shared their carbon emissions in 2011, and this is expected to increase in 2012. The Carbon Disclosure Project reported a 20 percent increase in indirect emissions reporting at leading companies (indirect emissions comprise approximately 80 percent of a typical company’s environmental impact).

Amy Hargroves, Manager, Corporate Social Responsibility at Sprint noted that shareholders are a driving force in the upsurge of corporate sustainability. According to Hargroves, sustainability is being driven by “increasing linkage between corporate responsibility and corporate reputation/brand identity and increasing shareholder activism on key issues.”

Supply Chains

Rather than focus solely on their own footprints, in 2012, corporations are taking sustainability concerns further and focusing on corporate supply chains. The Green Research study found that supplier sustainability performance is one of the most widespread corporate sustainability initiatives for 2012.

Rupesh Shah, Director of Corporate Sustainability at Intuit predicted that, “companies will dive deep and look for cost-saving opportunities to eliminate waste and operate leaner in the areas of operations, supply chain and distribution chains.”

Sustainable supply is one of most significant trends because it has the potential to bring about tremendous reductions in environmental impacts. As indicated by Alison Taylor, Vice President, Sustainability-Americas, Siemens Corporation:

“If we are instrumental in embedding sustainability into our supply chain, then we will spread sustainable practices much more effectively than simply reducing our own operational footprint. I think that many companies have recognized the opportunity that exists in their supply chains. But, our supply chains are large, global, and diverse. We will be talking about these challenges and opportunities in 2012.”

Economic Weakness

Economic difficulties are sometimes cited as an obstacle to corporate sustainability. However, far from being an impediment to sustainability, the state of the economy can actually be a powerful driver. Many see a direct link between the state of the economy and the drive towards greater sustainability. Being more efficient and reducing risk is good business, particularly in an unstable economic environment.

Both economic instability and climate change may be part of the new reality, but as Eric Olson, Senior Vice President at BSR points out, this will only increase corporate sustainability.

“Unfortunately, I believe we will continue to see the kinds of disruption -- both in the markets and in Mother Nature -- that have caused so many companies to question ‘business as usual’ and to recognize the value of sustainability in navigating the risks and opportunity of a brave new operating environment.”

Sustainability offers a strategic framework for organizational enhancement and a winning value proposition.

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Richard Matthews is a consultant, eco-entrepreneur, green investor and author of numerous articles on sustainable positioning, eco-economics and enviro-politics. He is the owner of THE GREEN MARKET, a leading sustainable business blog and one of the Web’s most comprehensive resources on the business of the environment. Find The Green Market on Facebook and follow The Green Market’s twitter feed.

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