Corporate sustainability is key to survival

Corporate sustainability is here to stay.

Corporate sustainability is here to stay. The real question is how long it will take for the C-suite and boards of directors to adopt a business approach that goes well beyond the traditional means of creating and developing corporate value.

The growing calls for companies to engage in corporate sustainability goals and practices comes at a time when increasing scarcity of natural resources, rising energy costs, climate change, quality of life, and competition from emerging economies are issues related to corporate survival. And it comes at a time when a commitment to sustainability is a cost factor whose short-term benefits, weighed against other pressing bottom-line factors, can cause corporate leaders to say, “Not now. Later.”

A 2008 study by the Vandiver Group, a strategic communications firm, shows that CEOs are the primary drivers of sustainability decisions, yet their communications and public affairs managers are rarely involved in those decisions. It also shows that improving perception of the company rates higher than increasing revenue from sustainability programs.

A recent report from the Grocery Manufacturers Association and PricewaterhouseCoopers, however, shows that companies employing sustainability practices generally experience higher gross margins, return on sales, return on assets, cash flow, and shareholder return compared to their peers. A Natural Marketing Institute study cites GE's “Ecomagination” campaign as an example of where selling green products can produce substantial bottom-line results.

A few corporate leaders and their boards have made a staffing and financial commitment to sustainability. One example is cited as a model by sustainability supporters: SAP.

The business-software maker has 75,000 customers in more than 120 countries, so it has the reach and resources to implement sustainable practices thoughtfully. And it does.

SAP uses social media tools to encourage stakeholder collaboration – a process requiring transparency and engagement. It has a history of taking initiatives in education, transparency, and governance when working with customers, governments, and NGOs. It has been recognized by the FTSE4Good and the Dow Jones Sustainability Index, and is on the Global 100 Most Sustainable companies list that rates companies for their social, environmental, and strategic governance issues.

The 2008 sustainability report, published in May, includes a letter to stakeholders from CEO Léo Apotheker. He describes SAP's long-term strategic commitment to sustainability and calls for a “reset world” where “enlightened businesses optimize resources at every stage of the lifecycle, manage [and not just account for] carbon emissions, customers, and partners in these efforts.”

Clearly, this requires a major commitment of resources. Moreover, it necessitates a new way of thinking on the part of top managers and boards. It would be interesting to look at our business schools to see to what extent corporate sustainability is part of today's curriculum. My guess is not much. There is an educational need to change the way our future corporate leaders think in this regard.

What is disconcerting are the surveys that note how much corporate communications and IR pros are out of the loop in developing and communicating their company's sustainability efforts. Apotheker notes in his letter the impact of sustainability on brand and reputation. Aren't corporate communications executives keepers of their companies' brand and reputation? What's the disconnect?

I have a hunch that corporate communications and IR officers are merely responding to what they sense their audiences want, as opposed to taking the initiative to help build a sustainability program for the long-term benefit of their global business enterprise. One can see, for example, more and more mining companies are initiating sustainability programs because they recognize that resources are becoming increasingly difficult to find and they are operating in countries where they must have permission to extract those resources.

Smart companies are going there with great commitment. Others will surely follow if they want to be successful business enterprises operating in a global environment where competitors are pursuing sustainability programs.

Lou Thompson is a partner at Beacon Advisors. A noted expert in corporate disclosure, governance, and communications, he was president and CEO of the National Investor Relations Institute for nearly 25 years. Thompson is a columnist with PRWeek's sister publication Compliance Week, in which a column on this topic also appeared.

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