Does being green give companies a competitive advantage?
Look no further than WalMart, Clorox, Kimberly Clark, P&G, Ford or any other corporation that has developed green product lines or made investments in major sustainability initiatives.
And many companies with sustainability baked into their mission have had enormous growth despite a lousy economy—just see B Corporation’s Rockstars of the New Economy.
And research by the MIT Sloan Management Review and Boston Consulting Group provides direct evidence that sustainability delivers in measurable ways.
According to The Innovation Bottom Line report’s fourth annual survey of 4,000 executives and managers, 37 percent of respondents say sustainability added to profits, up 23 percent from the last survey. Direct benefits include:
- Improved brand reputation
- Better innovation of products and services
- Improved perception of how the company is managed
- Increased competitive advantage
- Reduced costs from efficiencies in energy, waste, and materials
- Better innovation of business models and processes
But to obtain these benefits, companies must make a commitment to sustainability. The survey researchers found that companies need to develop a business case for sustainability, and those that are most successful change their business model or have sustainability engrained in the company from the start. More than half of companies that changed their business model say customer demand for sustainability led to changes.
This is no surprise to us. Just see Zipcar, Method, Patagonia, the B Corp Rockstars and many others.
What about the other 63 percent of respondents? Many companies struggle with justifying sustainability initiatives, and 37 percent say sustainability conflicts with other priorities. One finding reveals that investors are a “challenging” stakeholder group because their horizon for profit is short.
In reviewing the successful companies, the survey researchers identified the following practices for sustainability success:
- Be prepared to change business models. Deep and engrained change is a clear indicator of whether sustainability initiatives will boost success.
- Lead from the top and integrate efforts. Executives must set goals and integrate sustainability into the business.
- Measure and track goals and performance. This one is a no-brainer.
- Understand what your customers think about sustainability and what they are willing to pay for it. They’re not always willing to pay more; you need to know.
- Collaborate with people, customers, and organizations beyond the organization. Sustainability efforts offer a real opportunity to know customers better, and many companies form advisory groups to guide these efforts.
Ultimately, what companies do matters if we are to create a better world that sustains us all—the research doesn’t examine altruistic motives. I’m not sure it needs to; good intentions aren’t going to build the next economy. And it’s clear that sustainability has become a business imperative. Sixty percent of The Innovation Bottom Line survey respondents say sustainability strategies are necessary to be competitive right now, and another 31 percent believe they will be in the future.
We’ll keep an eye on how businesses can achieve and maintain their sustainability advantage, and report back in future posts.