In the search for growth, we often overlook the obvious. This is the case with the corporate pursuit of sustainability.
Too many companies view sustainability as “noncore” or as an analog for altruism. Investment in achieving sustainability is seen by senior executives as an infrequent effort to appease the masses, not a deliberate approach to create value for them.
This is unfortunate—mainly for these companies’ shareholders. Mounting evidence shows that a focused sustainability strategy can justify premium pricing, yield new product opportunities and lower costs throughout the value chain. Few companies truly understand that growth—in both the top and bottom lines—is right below their noses.
This post is the first in a series I will write based on my ongoing research and CEO advisory work in the fields of sustainability, collaboration and competitive strategy. I aim to share insights into specific companies and explore the link between sustainable development and corporate performance.
First, a bit of background on me. I am the author of two strategy and sustainability books: The Collaboration Economy and The Future of Value, as well as more than 50 articles on these topics. For nearly 10 years, I worked with Accenture, first as a consultant when the company was still Andersen Consulting, and then as a research fellow in the company’s Institute for High Performance. I also led market research groups at Fidelity Investments, served as a sustainability subject matter expert for Deloitte Consulting and earned my MBA in strategic management from Wharton in 2001.
I view sustainability through the lens of competitive strategy and financial performance. Long a skeptic of the likelihood of financial returns above internal hurdle rates from the pursuit of environmental and social stewardship, I became convinced of the connection when conducting the research for The Future of Value. I spent 18 months studying the strategies, governance and sustainability approaches of every company that appeared on the global Fortune 500 list between 2006 and 2010.
The group of companies that rated highest in my quartile ranking of sustainability leaders also outperformed the other quartile groups on stock performance during the same period. In fact, the top quartile of sustainability leaders’ stock performance outperformed the second quartile by 5 percent, the third quartile by 9 percent and the fourth quartile by 16 percent. With a couple of exceptions, the result was the same when I compared individual companies in the top quartile against their industry peers in the other quartiles. And this phenomenon has continued for the companies on the list between 2010 and 2012.
At least 46 other studies reveal the same findings.
The time has come when we are able to say that a company’s decision to embrace sustainability leads to financial outperformance of peers.
In my posts to come, I will share reasons why this is the case and what you can do to help your company achieve the growth it already has available in its system.
Editor’s note: The author welcomes your thoughts and questions about corporate sustainability in the comments section below (and hopes to generate more in his upcoming series of posts).
