t this year's World Economic Forum in Davos, Switzerland, an annual list of the most sustainable companies in the world was released. What is noteworthy about this year's list is that the top firms are not only doing good for society but also doing well financially. This year isn't an anomaly: since 2005, the most-sustainable businesses have outperformed their peers by nearly a third.
But despite the clear link between sustainability and profitability, most sustainability programs fail. Only 2 percent of companies either achieve or exceed their corporate sustainability goals. What is further disconcerting is that companies face few repercussions when they fail to meet their sustainability goals. With this in mind, most sustainability projects feel like more of a shell game: the purpose is not to reach the goals but rather to look like you are trying to do so.
The reason sustainability programs fail is clear: most business leaders fail to make a business case for sustainability. They haven’t ingrained sustainability into the value they offer their customers. While nearly 90 percent of business leaders believe that sustainability is essential to remaining competitive, only 25 percent say that their companies have developed a clear business case for sustainability.
This helps explain why sustainability programs fail and why companies face few repercussions. Corporations are built to make money and operate to drive the bottom line. If a sustainability project is not tied to that bottom line, it is expendable and nonessential to the company's reason for existence and for shareholders and customers.
The key to ensuring your sustainability goals are more strategic is to tie the project to specific business goals such as increased profits or revenue levels. If business leaders can present sustainability programs that tie into their company’s goals, the project will become more relevant to the business and to employees.
This approach to meaningful sustainability remains a largely untapped opportunity and our experts have a unique role to help customers monetize their sustainability goals.
“The reason sustainability programs fail is clear: most business leaders fail to make a business case for sustainability.”
Making the Business Case
A company’s sustainability goals and priorities should not be generic nor random. Instead, they should strategically connect to the business’ long-term goals and priorities. Each company has to consider what sustainability means to their business and what types of goals are meaningful and important to their bottom line. Companies cannot afford to waste valuable resources on projects that don't help its ultimate objectives.
We’re helping customers make the business case for sustainability by performing sustainability value audits and analyses. Our approach builds upon what many companies are already doing regarding total value financial assessments but from a sustainability perspective. When we look through the lens of sustainability, we consistently find hidden financial benefits and value drivers that only strengthen the business case for sustainability.
For instance, refrigeration and heating, ventilation and air-conditioning (HVAC) equipment account for 60 percent of the energy consumed in grocery stores. These areas are prime opportunities to leverage more energy-efficient practices and technologies but are usually neglected. By leveraging our Cryovac® vacuum packaging for meats and fish, our food processor customers extend the shelf life of their products which prevents food waste. However, using vacuum packaging technology also reduces packaging size. As a result, their grocery store customers rotate their stock less often, and store more product in their refrigerators, maximizing their labor efficiency and reducing energy usage.
Even if business leaders believe that sustainability has a strong business case and can provide a competitive edge, their employees aren't getting the message; 60 percent of employees think public reputation was the key driver of their company’s sustainability projects.
While sustainability certainly can — and does — improve a brand’s reputation, this reason alone will not drive change in organizations at the necessary scale and scope. Business leaders must effectively communicate the business case for sustainability to every employee and ensure they are held accountable.
A Never-Ending Endeavor
The journey toward more sustainable business practices never ends; there are always opportunities to continuously improve our operations to be more efficient in resource usage and those of our customers.
“It’s time for business leaders to redesign their approach and relaunch sustainability programs that are relevant to their overall business strategy.”
For instance, we’ve told the story about how one e-tailer reduced damaged television shipments and saved $12 million annually by adding additional packaging around the manufacturers’ packaging. But that’s not the ultimate solution. It’s a bandage. We need to work with manufacturers to redesign their packaging so it’s appropriate for both traditional retail and emerging e-commerce supply chains, providing value to manufacturers, retailers, shippers and end users - the complete omnichannel approach.
It’s time for business leaders to redesign their approach and relaunch sustainability programs that are relevant to their overall business strategy because sustainability programs must be a meaningful part of the business.
To learn more about how we are collaborating with customers to create innovative, sustainable strategies, read our Annual Sustainability Report.