Most environmental rating organizations, agencies or systems continue to focus on businesses’ operational impacts – for example, pollution levels – or environmental management practices. Public support activities that influence environmental regulations are not taken into consideration. This happens despite the fact that corporate political activities (like, for example, campaign funding) can be more effective in fighting climate change and promoting environmental protection, given the urgent need – worldwide – for far-reaching policy solutions.

Examples of advocacy activities, include:

• over one thousand business leaders who joined the We Can Lead group, which supports strong climate policy, and
• twenty companies that joined Business for Innovative Climate & Energy Policy, an important corporate policy advocacy group

Taking public support activities into account

Corporate responsibility ratings that influence buying decisions by consumers, employment decisions by jobseekers or investment decisions by socially responsible investors, should seriously consider political activities by corporations. Such activities may include support for climate action, including political contributions, and engagement or collaboration with non-governmental organizations. Effectively integrating such factors into their ranking procedures, is highly important for rating agencies and organizations. They will become more competitive and more valid, when evaluating and deciding on environmental leadership.

References:

This article is based on published information by MIT Sloan Management Review. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the following link:

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MIT Sloan Management Review

• According to two-thirds of survey participants, sustainability is highly important for being competitive in the modern marketplace  Tweet This!.

• Approximately 31 per cent of survey participants said their companies were currently profiting from sustainability initiatives.

• 68 per cent of businesses surveyed increased the time and resources committed to sustainability efforts.

• Companies profiting from their sustainability initiatives were:
  • more likely to have strong leadership commitment to sustainability, a separate sustainability report and sustainability function, a sustainability focus by business units, and a chief sustainability officer
  • three times more likely than other companies to have a robust business case for sustainability
  • 50 per cent more likely to clearly communicate who was responsible for sustainability
  • more than twice as likely, compared to other organizations, to have operational and personal key performance indicators connected to sustainability
  • 60 per cent more likely to relate sustainability to financial incentives
  • twice as likely to change their business model due to sustainability
  • more than twice as likely to say sustainability increased their collaboration with competitors

References:

This article is based on published information by MIT Sloan Management Review. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the following link:

https://shop.sloanreview.mit.edu/store/the-sustainability-challenge?utm_source=newsletter&utm_medium=email&utm_content=Learn%20more%20%C2%BB&utm_campaign=Enews%20Sust%2011/9/17

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Despite the difficulties cross-sector collaborative efforts have come across, complex sustainability issues have to be dealt with collaboratively  Tweet This! and on a global scale by businesses, to achieve systemic change. Three different, but interrelated, types of work are required:

• Conceptual work: Contextualizing complex issues. Different – yet interdependent – sustainability approaches, tools or frameworks have to be related and integrated. There is a need to:
  • collectively develop conceptual frameworks, building community, and
  • achieve clarity and simplicity, without oversimplifying complex issues

• Relational work: Open conversation and collaborative investigation. Far-reaching, sincere, reflective dialogue based on trust is required, to promote joint learning, exploration, and action-oriented initiatives.

• Action-driven work: Developing cooperative change initiatives. Feedback from diverse stakeholders has to be collected – a procedure that may require time and effort –, to ensure that effective, cooperative action can be taken for systemic change.

Three key questions

As the need for collaboration between governments, NGOs and businesses to tackle complex sustainability issues and achieve widespread systemic change becomes increasingly evident, three key questions remain to be answered:

• How can the transition from benchmarking to developing learning communities be accomplished?

• What is the proper balance between setting goals and providing space for innovation and reflection?

• What is the correct balance between public and private interest?

References:

This article was compiled using a publication by MIT Sloan Management Review. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the link below:

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How is an organization to make the transition to sustainability? What does this transition entail? How is any sustainability initiative – which is essentially different from other corporate initiatives – to be effectively realized? There are three separate phases in successfully carrying out a sustainability initiative, each requiring different skills and competencies – including, most importantly, leadership competencies – from the individuals involved:

• Making a clear and convincing case for change: As many organizations are not receptive, or are even reactive to sustainability (unaware of the opportunities involved), the individuals leading the sustainability effort – the sustainability leaders – must be able to communicate a convincing sustainability vision, collaborate, and influence others, also possessing change leadership skills.

• Turning vision into action: In this phase, the sustainability vision has to be translated into a complete change program consisting of specific initiatives and firm commercial targets. For this to happen, sustainability leaders must be skilled in results delivery and, at the same time, have a commercial orientation, being able to take corrective action when needed.

• Developing a long-term sustainability strategy: As sustainability becomes a core value for the organization, creating competitive advantage, sustainability leaders have to be able to anticipate future needs and trends, pursuing partnerships and encouraging innovation.

References:

This article was compiled using a publication by MIT Sloan Management Review. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the link below:

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Quite often, business executives fail to realize the extent to which truly radical thinking and action are needed to move from unsustainability towards sustainability, and change the way businesses operate – they fail to recognize that sustainability is a radical idea, requiring equally radical action  Tweet This!.

Reducing unsustainability, instead of promoting sustainability

Innovative solutions are required, but the global business community seems to be focused on economic development as a central theme, despite the fact that sustainability may, essentially, have nothing or little to do with economic development as such. Businesses are, thus, only concentrated on reducing the unsustainability of a defective economic development system founded on an addiction to consumption – with consumption representing a major cause of unsustainability, in both human and environmental terms.

What should be done?

Sustainability may be defined as the “possibility that all forms of life will flourish forever”. So, how can businesses contribute to achieving this vision? Below are a few steps that could be taken in such a direction:

• changing the rules of the competition, not least through voluntary, collaborative action involving business, government, advocacy and intergovernmental groups
• redefining, collaboratively, the idea of what constitutes progress, redefining profit
• critically assessing a company’s core mission and values, in terms of the sustainability or unsustainability created
• promoting, through the design of products and services, responsible, ethical behavior and choices in daily life

References:

This article was compiled using a publication by MIT Sloan Management Review. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the link below:

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While the research stresses that businesses should not rely solely on government intervention to address major sustainability topics such as climate change, it draws attention to international initiatives guiding companies in dealing with – and communicating their performance on – environmental, social and governance (ESG) issues, including:

• the UN’s Principles for Responsible Investment (UN PRI), to which over 1,600 investment organizations have committed;
• the Sustainability Accounting Standards Board (SASB) in the U.S., developing sustainability accounting standards and a materiality matrix identifying, for businesses, key sustainability issues;
• the UN’s Sustainable Stock Exchange Initiative, aimed at the creation of more sustainable capital markets through the collaboration with stock exchanges.

According to MIT SMR and BCG’s research, companies should take certain key steps in developing sustainable business practices  Tweet This!, including the following:

• The importance of a sustainability strategy: while 90 per cent of executives consider sustainability as important, only 60 per cent of businesses have a sustainability strategy in place, despite the great significance of having a real sustainability strategy fully embedded into a company’s business strategy. The survey also found that the percentage of companies with a sustainability strategy increased in Europe, Latin America and Australia.
• Concentrating on material issues: businesses focused on material issues, with their sustainability efforts directly connected to material business issues, reported up to 50 per cent extra profit from sustainability – successfully connecting strategic necessity to strategic opportunity.
• Organizing your business properly in order to achieve your measurable objectives: building sustainability into business units doubles the likelihood of your organization profiting from its sustainability initiatives.
• Building a business case for sustainable business practices: although 60 per cent of companies had a sustainability strategy, only 25 per cent had developed a clear business case regarding their sustainability efforts.

References:

This article was compiled using a report by MIT Sloan Management Review (MIT SMR) and The Boston Consulting Group (BCG). For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the link below:

http://marketing.mitsmr.com/offers/SU2017/58480-MITSMR-BCG-Sustainability-Report-2017.pdf?utm_source=Publicaster&utm_medium=email&utm_campaign=susrpt17&utm_content=Corporate+Sustainability+at+a+Crossroads&cid=1

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More specifically:

• 63 per cent of the survey’s respondents who said their companies profited from sustainability activities also said their company changed its business model on account of sustainability
• 46 per cent of survey respondents who changed their business model because of sustainability said sustainability efforts added to their companies’ profits, compared to 26 per cent of those who did not change their business model
• 50 per cent of survey respondents who changed three or four business model elements because of sustainability said their companies profited from sustainability initiatives, while only 37 per cent of those who changed only one element of their business model said so
• Survey respondents who said that, due to sustainability efforts, they changed their business model and strengthened collaboration with 6 to 10 types of stakeholders were more than twice as likely to say their companies profited from sustainability, compared to respondents who changed their business model but increased collaboration with not more than two types of stakeholders

According to the survey, in order to increase their sustainability-based profitability, companies should:

• Be prepared to change their business model
• Understand how their customers think in relation to sustainability and what they would be willing to pay for, as regards sustainable products or services
• Collaborate more extensively with customers, businesses, individuals and groups outside the company’s boundaries

References:

This article was compiled using a survey by MIT Sloan Management Review and the Boston Consulting Group (BCG). For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the survey’s meaning. If you would like to quote these written sources from the original please revert to the link below:

http://sloanreview.mit.edu/article/the-benefits-of-sustainability-driven-innovation/

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According to a study by Robert G. Eccles, Kathleen Miller Perkins and George Serafeim, comparing “sustainable” companies with “traditional” ones, building a sustainable company characterized by a culture of trust, innovation and change capabilities, is a two-stage process.

Stage One: Reframing your company’s identity

Reframing a company’s identity requires:

• Leadership commitment, i.e. making sustainability considerations part of the leadership’s commitment to the company. According to the study:
  • 95% of the leaders of sustainable companies embed sustainability concerns into basic business decisions, compared to only 30% of traditional companies’ leaders
  • 83% of sustainable company leaders show a personal commitment to sustainability  Tweet This! (vs. 50% of leaders at traditional companies)
• External engagement: sustainable companies take seriously into account the expectations and concerns of key external stakeholders. According to the study:
  • 72% of sustainable companies encourage employees to learn from sources external to the company, while only 20% of traditional companies do so
  • 90% of sustainable companies send clear and consistent messages to their stakeholders (vs. 30% of traditional companies)

Stage Two: Codifying your company’s new identity

The company’s new identity will become a reality through:

• Employee engagement: the company should personally engage employees in its sustainability initiatives. According to the study:
  • Sustainable companies are far more likely to have an employee engagement strategy in place (72% compared to 30% of traditional companies)
• Mechanisms for execution: the company should create mechanisms for executing sustainability strategies. According to the study:
  • 83% of sustainable companies had company-wide management systems for implementing sustainability strategies, compared to only 20% of traditional companies
  • 66% of sustainable companies connected sustainability to performance evaluation and compensation (vs. 10% of traditional companies)

References:

This article was compiled using a study by Robert G. Eccles, Kathleen Miller Perkins and George Serafeim (MIT Sloan Management Review). For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the study’s meaning. If you would like to quote these written sources from the original please revert to the link below:

http://www.hbs.edu/faculty/Publication%20Files/SMR_Article_EcclesMillerSerafeim_77d4247b-d715-447d-8e79-74a6ec893f40.pdf

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There are, however, differences between these two types of partnerships, with each requiring a different approach. Imagine driving a car: these differences are like the rules of the road, on the one hand, and other conditions, such as weather or a traffic jam, on the other. Government regulations are like the rules of the road: they must be understood and followed, and rarely change. Other conditions, just like NGOs’ concerns, need more regular attention, change often and have to be properly planned for and managed.

As regards collaborations with government, industry leaders being assembled by government to deal with a specific topic or government participation in broader industry initiatives are both beneficial forms of engagement, for both government and business. When it comes to partnering with NGOs, a healthy tension should be created, with constructive criticism – not forgetting that NGOs serve different purposes, compared to businesses.

Two examples that embody the abovementioned principles are the Tropical Forest Alliance 2020 (TFA 2020), with companies like Walmart and Unilever creating a global network aimed at eliminating deforestation from supply chains (an initiative that attracted and involved several NGOs and governments), and CDP (formerly the Carbon Disclosure Project), an organization which works with companies (but also cities, states and regions) to disclose information and report on their environmental performance.

References:

This article was compiled using a publication by MIT Sloan Management Review. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the link below:

http://sloanreview.mit.edu/article/building-lasting-collaborations-with-government-and-ngos/?utm_source=Publicaster&utm_medium=email&utm_campaign=SU+4%2f20%2f17+-+Climate+Risks+blog&utm_content=each+needs+a+different+approach

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Should companies only strive to maximise shareholder value or try to serve the interests of all stakeholders?

There are two conflicting theories attempting to answer this fundamental question: the shareholder theory, on the one hand, and the stakeholder theory, on the other.

According to the former, businesses should only be oriented towards maximizing their profits and shareholder returns. According to the latter, companies are accountable to all their stakeholders (such as employees, customers, suppliers and local communities), and not just their shareholders, even if considering stakeholders’ interests means reduced profits.

A crucial difference between the two competing theories is that for the shareholder theory, stakeholders and their interests are seen as a means to the end of a company’s profitability, whereas for the stakeholder theory, stakeholders’ interests should be regarded as an end in themselves  Tweet This!.

It has also been argued that companies’ managers are, inescapably, driven to embrace the shareholder theory, as they face dismissal, if they do not maximize a company’s profitability. But, at the same time, it has been shown – for example, by a study by Julian Franks and Colin Mayer – that neither legal, nor market forces or mechanisms impose the shareholder theory on senior executives.

What should executives and boards of directors do?  

As we seem to be entering a post-shareholder value era, with the stakeholder theory becoming more popular in recent years, company executives and board members:

• Could shift from speaking about “maximizing shareholder value” to talking about “maximizing our company’s value” or “maximizing our company’s contribution to our economic system”.
• Should feel free to openly change their attitudes, not least as regards expressing their belief in the stakeholder theory.
• Should communicate their company’s objectives clearly – regardless of which of the two theories they embrace –, in order for midlevel managers not to be confused.

References:

This article was compiled using a publication by MIT Sloan Management Review. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the link below:

http://sloanreview.mit.edu/article/the-shareholders-vs-stakeholders-debate/

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